Market View

Quarter 4, 2022

2022 Market Summary

Stock Market Returns 2022:                CANADA:  TSX60  - 9%              USA:  S&P500  – 19%

It was a bumpy ride! That pretty much summarizes the 2022 year in financial markets. Both stocks and bonds had negative returns, highlighting how unusual last year was. We also had one of the most aggressive Central Bank tightening cycles in over 50 years. Commodities (such as oil) were the only asset class with positive returns in 2022. As a result of its commodity exposure, Canada outperformed the US both in terms of stock and bond performance last year. When we look across the world, global equities posted their worst year since 2008 due to a variety of reasons including continued high inflation, rising interest rates, the war in Ukraine and the continuing Covid-related issues in China.

PMC’s Perspective

“It’s tough to make predictions, especially about the future,” said Yogi Berra. Everybody has a cloudy crystal ball meaning that looking ahead is fraught with challenges. However, perhaps a look back to the past could well provide some clues as to what is next.

One of our portfolio managers (we won’t say who) started on Bay Street in the fall of 1979 and has lived through a variety of challenging markets. At that time, gold was $800 per ounce. In the mid 1970s, gold traded in the $30 per ounce range, so it had increased about 25-fold. As a result of that spectacular investment performance, people were lined up on King Street in Toronto in 1979 to buy the metal from the Bank of Nova Scotia. That was a (minor) bubble but a bubble just the same. It popped shortly afterwards. It provided a valuable lesson that PMC clients would benefit from - keep a diversified portfolio with an eye to long term growth.

Twenty years later in 1998, 1999 and early 2000, when all current PMC portfolio managers were on Bay Street, we witnessed a true broad-based bubble as technology shares soared on anticipation of this newfangled thing called the internet.  That bubble popped in the year 2000.  In the US, the pop occurred in March, but was delayed until August in Canada as a result of Nortel.  The pop, when it arrived, was loud and wiped out significant wealth for those still holding tech shares. The portfolio managers at PMC had lightened their technology weights significantly in 1999 but tech shares kept rising. Eventually they would fall, and nobody knew when, but PMC clients were well served by PMC’s early exit from technology shares.

The most recent bubble occurred in the years 2018, 2019 and 2020 as US technology stocks dominated the market averages such that another bubble was formed.  With their valuations rising sharply as a result of ever lower interest rates, these stocks could do no wrong, and would continue to dominate the world as far as the eye could see. Work from home protocols due to Covid-19 gave these stocks an additional boost. However, competition does show up and high valuations don’t last forever. This bubble popped with the Covid vaccine and a return to more normal business conditions starting in 2021. PMC largely avoided this recent technology bubble. In 2022, “business as usual” conditions have been hampered by rising interest rates due to increasing inflation in areas like oil and gas. This has resulted in 2022 being a challenging year for financial markets.

So, what does our murky crystal ball say?  Rising rates slow economic growth with a lag.  Estimated earnings for 2023 look too high and that leaves us believing that equity market returns will be muted in the near term.  However, as time passes, and assuming markets do not move significantly higher, the delaying of positive returns for a period can be looked at as the coiling of a spring, meaning, that when business conditions do improve, a market upturn may be on the horizon.


  1. Interview in the Globe and Mail on December 30, 2022: “Nine Canadian fund managers offer their best portfolio advice - and top picks - for 2023” The online version can be found here:
  2. Interview by the Canadian Press on December 19, 2022: “S&P/TSX composite suffers triple-digit losses as December decline continues”. The interview can be found here:
  3. “Despite markets going down, the repricing of risk appears to be orderly” on December 9, 2022 via BNNBloomberg: