After a Santa Clause Rally failed to materialize in December, it turned out that Santa was just delayed. In January the markets experienced a significant rally to start 2023 off on an optimistic foot. Below is a review of how the markets faired in January.
January 2023 Index Performance:
- S&P500: 6.2%
- NASDAQ: 12.9%
- DOW: 2.9%
- TSX: 7.0%
There were multiple positive stories that helped propel the recent January rally. The first of which was China reopening its borders after 3 years of a zero-Covid policy. Passengers can now enter China without quarantine restrictions and Chinese travelers can freely leave the country, which may prove to be a global economic boost. It is estimated that over the course of the pandemic, Chinese consumers saved $836 billion USD in excess savings. Moving forward, any countries that rely on tourism may end up getting a piece of the pie.
The markets received another boost as fears of a European energy crisis were pushed down the road. Europe has experienced unexpectedly warm weather to start the year. Budapest was 18.9 degrees Celsius on January 1st. The war in Ukraine resulted in sanctions on Russian fuel exports to the rest of Europe, and European governments were struggling to find alternatives. However, due to the mild weather, gas demand for heating has fallen. Winter has a way to go, but for now, mother nature has cooperated. For more on this, please click HERE.
Lastly, the Bank of Canada raised interest rates by 0.25% to 4.5% at the start of 2023. But more importantly they signaled a pause in rate hikes for now, and any future hikes will be data dependent. This combined with general market optimism that the worst of the rate hikes are behind us gave additional fuel to the January run in the markets.
