Quarterly Newsletter - Summer 2022

A hot and active summer?

Like the weather in Quebec this summer, stock markets risk giving us stormy and uncertain days, followed by beautiful days of sunshine! After several months of market decline and the end of the bear market, investors are wondering about how the economy will evolve. After the war in Ukraine, there's the war on inflation! Will the higher-than-expected increases in key rates of Canadian and US central banks trigger a recession? One thing is certain: there will be a global economic slowdown.

Investors will be watching several events this summer:

  • Ukraine–Russia conflict (effects on gas, oil and grain prices).
  • Resumption of COVID-19 and lockdown in China (effect on supply chains).
  • Key policy rate hikes in 2022 and possibly a drop in 2023, according to Wall Street! Time will tell who was right.
  • Q2 financial results.
  • High inflation (8.1% in Canada and 9.3% in the US on an annual basis).

In its latest speech, the Bank of Canada forecasted a GDP growth of 3.5% in 2022 and 1.75% in 2023. It will be late 2023 before inflation returns to 3%, and 2024 for a return to the 2% target. Desjardins Group economists estimate that there is a 50% risk of recession in Canada and the United States. American economists differ on the economic outlook. A Bloomberg survey reveals that 12% predict a soft landing of the US economy within 24 months. The hard landing without a recession scenario is forecasted by 40%, and the recession scenario is predominant, at 48%.

Is a recession without job loss possible?

Employers in both the United States and Canada are desperately looking for workers. The number of positions to be filled has reached record levels. This number is close to 1 million in Canada and 10 million south of the border. Which brings us back to the enigmatic question of a possible recession not leading to an increase in the unemployment rate. Is it a new type of recession?

When will stock markets recover?

Everything will depend on inflation! Lower inflation rates should favour the equity market, and I hope the fall will be more comfortable. Is it time to invest? In the short term, there may be further shocks depending on the announced economic data, but over the medium- and long-term investment horizon, it will soon be a good time to invest in high-quality companies.

Should we be concerned about the declines in recent months? Remember that volatility is an integral part of an investment cycle, as are recessions and corrections. It's no fun to see our assets go down, but history shows us that it's better to stay invested and patient than to sell and suffer losses while waiting for better days. The upward trend may come more quickly than expected.

Have a great summer!

Each Desjardins Securities advisor named on the front page of this document, or at the beginning of any subsection hereof, hereby certifies that the recommendations and opinions expressed herein accurately reflect such advisor’s personal views about the company and securities that are the subject of this publication and all other companies and securities mentioned in this publication that are covered by such advisor. Desjardins Securities may have previously published other opinions, including ones contrary to those expressed herein. Such opinions reflect the different points of view, assumptions and analysis methods of the advisors who authored them. Before making an investment decision on the basis of any recommendation made in this document, the recipient should consider whether such recommendation is appropriate, given the recipient’s particular investment needs, objectives and financial circumstances.

Author :

Martin Archambault | BBA, CIM®

Portfolio Manager, Senior Wealth Manager

514-985-4265 ext 5064265

Back to top