In your hands

Remember the last scary stock market crash?

Sure ya do. It was Monday. This is Thursday.

The S&P 500 – the only index that actually matters – is 0.95% lower (as I write this) than it was pre-disaster, way back last Friday. So far in 2024 the index has risen 11.5%. The gain over the last 12 months is 17.5%. In the past five years the S&P has risen 81%.

This advance of about 15% annually compares with the average GIC return over the past 60 months of just over 2% – which was less than inflation. So much for keeping money ‘safe’ when it actually lost value.

By the way, five years ago a detached house in 416 was selling for $1.246 million. Now it’s $1.648 million – an increase of $401,629, or 24%. That’s growth of 4.8% annually. Of that, 3.44% was inflation – for an average return of 1.4%. Yeah, your crappy bank savings account did better, and you didn’t have to insure it, heat it or prune it.

By the way, the stock market in New York shed 3% of its value on Monday. Donald Trump immediately labelled it the ‘Kamala crash’ even though she had zippo to do with it. In reality there were deeper one-day losses during his presidency. More importantly, the market has lost 3% or more in excess of 600 times in past decades. And it recovered – 100% of the time.

This time the bounce-back is taking about five days.

Let’s put all this in context (and try to forget about yesterday’s topic. Sheesh.)

The labour market is losing some stram, just like the bank of Canada and the Fed wanted. After all, that was the point of 10 rate hikes here and 11 down there – to cream inflation by shutting down credit and expansion. It worked. The jobless rate is rising, but not spiking. There’s more to come. The challenge now is guiding the decline to a soft landing (yes, that is still the goal).

A big part of that will be reversing those rate cuts in a measured and effective way. CIBC’s bainy economists are now forecasting the Tiff rate here – currently at 4.5% after two rate cuts – will be 2.5% by December of 2025. Looks like another reduction is coming next month and rates may be 75 basis points lower by Christmas. That will take the chartered bank prime to south of 6%, and make those who took variable-rate loans start to look less moronic.

Meanwhile corporate profits are on track to rise about 11% year/year. The latest (initial jobless claims) data has eased fears of a rapid economic slowdown. In Canada, no recession. “For all of 2024, Canada’s economy looks to grow 1.1%, about in line with last year’s tepid performance,” says BMO Economics, “before rate relief kicks in and spurs a moderate pickup to 1.8% in 2025.”

We also know the world is on the cusp of more dramatic techno change. Spending on AI is forecast to jump from under $40 billion a year to more than $430 billion within a decade. Every day life becomes more automated, robotic, digitized, online and efficient. In a societal sense, this will surely bring much disruption. In financial terms, it’s like the birth of the Internet all over again. Twenty years ago Apple stock traded for 94 cents. Google was $2.50. These are now among the wealthiest, most cash-rich and dominant corps in global history.

The lesson of this week is simple. We told you about it during the storm on Monday. “These are not the end days,” this pathetic blog concluded, “unless, of course, you lack perspective. Understanding. Experience. Then you make mistakes.”

It would be a mistake at the moment to be diverted by things that don’t really matter to most people’s futures. Gender diversity. MAGA. Refugees. Wokism. Pride. Kamala’s DNA, Trump’s convictions or the number of turbans in Brampton.

Focus instead on what you can do, for your family and your years ahead. Invest, don’t save. Avoid a one-asset strategy. Stuff tax shelters. Be balanced and diversified. Never sell into a storm. Do not turn paper losses into real ones. Never try timing the market. Don’t be a tax cheat. Turn off BNN. Shun debt. Eschew FOMO. Get a dog and learn that time is the most valued commodity.

Markets rise. They fall. You are on a journey that ends. Don’t blow it.

About the picture: “This is my niece’s dog Blue,” writes LeeAnn. “He’s helping out in the garden with my sister this summer, planting, watering, and enjoying the abundance of fresh summer vegetables. You would be welcome to use for your blog. Perhaps some of your readers would benefit from a sense of gratitude toward the abundant, simple pleasures in life.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.