By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and
Marchello Holditch, CFA, Vice-President
Markets roared back in January from December’s steep sell-off. The S&P/TSX Composite Index was up 8.7% – it’s best month in a decade. In the U.S., the S&P 500 Index had its best January performance in over 30 years. International equities also surged and the “risk-on” sentiment echoed across other asset classes, such as corporate bonds. This is hardly the outcome one would expect to go along with mixed corporate earnings and growing evidence of a slowdown in global economies. If underlying fundamentals haven’t changed, then what gives? The answer is, once again, a dovish pivot by the U.S. Federal Reserve (Fed). The Fed’s recent statement has effectively put a floor on asset prices by implying that if things get more challenging, it will provide a bailout by lowering interest rates and adding money supply, a “Fed put,” so to speak.