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The Globe and Mail

The COVID-19 pandemic has been awful in almost every conceivable way—more than 6.2 million dead, countless businesses destroyed, government finances in shambles, and the mental health of a generation of kids scarred in ways we may not fully understand for years. Awful in almost every conceivable way—except, that is, for investors.

In the early weeks of the crisis, as lockdowns took effect and comparisons to the Great Depression abounded, central banks, including the Bank of Canada, slashed interest rates to zero and launched quantitative easing measures that saw central-bank balance sheets nearly double to US$27 trillion. The effect of all that monetary stimulus on asset prices, like real estate and stocks, was immediate.

From the middle of March 2020, when the shock of the unknown gripped the world—exactly how does a global economy turn off, then reboot itself?—markets began to explode; save for a few pauses along the way, they haven’t looked back. And the Toronto Stock Exchange, with its heavy weighting in natural resources, has been a relative outperformer over the past year, especially as the Russia-Ukraine war kicked commodity prices into overdrive.

Still, it’s hard to appreciate how supercharged markets have been until you compare this post-recession cycle against past downturns and recoveries. Over the past 50 years, only in the case of the double-dip recession in the 1980s was the market back in the black at this stage of the recovery, and that rebound was much more subdued than what we’ve seen since 2020. (We also included the market performance after the 1929 crash for perspective.)

Will it last? At press time in early May, investors were clearly being shaken by the rapid pace at which central banks appeared to be planning to withdraw stimulus from the economy, leading some economists to warn of another recession. If that happens, the most confounding market recovery in decades could become a distant memory.

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