It’s been on all of our minds, especially lately, right? We’ve seen the market jump up and down all over the place. And right now, the TSX today is finally back past $20,000. But does that mean it’s sustainable?
Canadian investors (and indeed investors everywhere) don’t want to be burned yet again. So, let’s look at some of the signs to watch that a bull market is coming.
Look outside the market
The first key to seeing if a bull market is here to stay is to think outside the market. This means looking at the economy as a whole as well as government signals. For instance, strong economic indicators would mean that there is growth in the gross domestic product (GDP) of countries around the world. Further, that there are lower unemployment rates and positive manufacturing and service sector markers for a bull market.
The government response as well is a great indicator, as it tends to be on the more conservative side. If the government and central bank policies support a bull market, then the market likely will as well — hence why we’ve been watching interest rates and inflation markers so closely.
But honestly, make sure to look around the world, not just in Canada. While Canada may be down, the fact that the United States and the United Kingdom are improving is a clear marker that we’re on the way up. So, consider all this if you’re looking to invest in a bull market.
Technical analysis looking up
There are a few technical markers that will also state that we’re entering a bull market. For instance, a great way to see if a bull market is on the way is by looking at the volatility index, or VIX. The VIX looks at technical indicators and is commonly known as the “fear index” or “fear gauge.”
The VIX is designed to reflect the market’s expectations for future volatility looking at the last 30 days. There is an inverse relationship with the market in this case. The higher the number, the more fear and the lower the market is likely to perform. Meanwhile, the lower it is, the higher the market should perform.
Right now, the VIX is down 40.5% year to date as of writing at 13, with anything under 20 quite low. Therefore, it looks like investors are more positive about the future. Yet this doesn’t mean the market is certainly due to rise. Other indicators include looking at trend lines, moving averages, and chart patterns on the market to see whether it’s moving up at a stable click.
Earnings
Yet perhaps some of the biggest pushes upward come from earnings. Specifically, Canadians should look at large corporate earnings that would have a major influence on the market. The better these larger companies are doing, the better the market should continue to do as a whole.
Specifically, look at corporations that tend not to do well during a recession or downturn. This would include financial institutions, energy companies, technology companies, and consumer discretionary companies.
Right now, tech stocks like Shopify (TSX:SHOP) have been rising as consumers are indeed buying those discretionary products more. The company saw earnings rise strongly during the latest quarter, and with Black Friday to Cyber Monday on the way, it should see another huge rise in earnings in the near future.
Yet, while Shopify stock recently hit 52-week highs, it’s still far from its $228 all-time high. A bull market could therefore be just what it needs to rise through 2024. So, if you’re looking for a deal, this could be it. Meanwhile, keep your eye out for these indicators that could say a bull market is clearly on the way.
