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There is an old saying on Wall Street… “As goes January so goes the year.” If it holds true this year, we could be setting up for a significant rally. After the first two weeks of trading the Nasdaq has jumped 5%, the S&P and Dow up 3% and the TSX 4.8%.  More importantly the snap back from last year’s big losers is impressive and proves the other old adage that it is “time in the market” and not “timing the market” that counts. In the S&P for example, the top three stocks are Warner Brothers, United Airlines and American Airlines are all up 30%. Not bad for 2 weeks work. In Canada, the returns have not been quite as spectacular but there are close to a dozen companies that have jumped over 20% this January. That includes Nuvei, Equinox Gold, Ballard Power, Canada Goose and Sprott. From a sector standpoint the only lagging sub sector for 2023 is energy which is a bit surprising given the price of crude rebounding to $80.00 per barrel. We attribute the negative performance to falling natural gas prices which started the year at $4.10 and closed today at $3.25. We believe the drop is a function of higher-than-normal winter temperatures coupled with the unwinding of futures contracts now that European gas storage levels are sufficient to meet heating demands.

Having said that, energy is the second-best performing sector this week (up 4.3%), surpassed only by real estate up 5%. That in turn is being supported by falling bond yields courtesy of the lower-than-expected US inflation stats yesterday. We also note that gold has rallied almost $100 and is solidly back through $1900 per ounce and explains why the global gold stock subsector is up 11.6% in 2023. Mind you it is the junior golds gaining the most traction. Names like Victoria Gold, Equinox Gold and Aris mining are all up over 20%.

Back in the USA, earnings season unofficially kicked off with Bank of America, Citigroup, JP Morgan and Wells Fargo all reporting before the opening bell on Friday. For the most part, they beat street estimates but also increased their loan loss provisions and giving cautious guidance for 2023. In aggregate the four companies set aside $4 Billion dollars to offset potential bankruptcies. Meanwhile we may be witnessing a shift back from value to growth if we use the mega cap growth stocks as a guide. Amazon and Nvidia have rallied 13% this week, Tesla up 7% and Meta and Microsoft up 5%.

Turning to next week, analyst and investors will digest 235 US corporate earnings led by Goldman Sachs and Morgan Stanley on Tuesday, United Airlines, Prologis and Kinder Morgan on Wednesday, P&G, and Netflix Thursday. We note US markets will be closed on Monday as Americans celebrate MLK Day so Canadian market action will be lighter than usual. Overall though it appears the bulls are back, unless we get a strong bounce in retail sales and housing starts, either one of which could derail the current rally.

Happy Trading and stay safe.

Steve Bokor and the Ocean Wealth Team.

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