Markets crumbled somewhat on Tuesday ad the Fed chair signaled that the U.S. Fed funds rate would ultimately be going higher than previously thought.
The S&P 500 was down 1.5% and Toronto 1.2%.
Aecon was strong once again with a 4.4% gain.
I have said before that the stock markets have been slow to accept just how high interest rate are going to go and how long they will stay there. With the U.S. Q4 earnings season over there may not be much reason to think that the S&P 500 will rise in the next few months. It’s more likely to be steady or to fall on bad news. But a lower inflation report or an improved situation in Ukraine could be catalysts for stronger markets. It’s seldom a good idea to get scared out of the market. But having a solid allocation to fixed income is also wise. And now that cash pays a decent return, fixed income should include an allocation to cash.
The next Bank of Canada interest rate decision comes out tomorrow morning. All indications are that they will pause. But they might signal that the next move is likely another hike.
The Canadian dollar is down to 72.7 U.S. cents. I have some U.S. cash and this may be an opportunity to bring some of it back to Canadian dollars. Each $1.00 U.S. is worth about $1.37 Canadian.