When Is a Bull Market Coming for Canadian Investors?

We’re still not in a recession, but here is how to prepare for when a bull market finally arrives, which could certainly be in 2023.

Amy Legate-Wolfe ❯

@amylegatewolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest.

Published February 25, 2023 10:30 am EST

It’s practically an impossibility to nail down. Canadians continue to trade in a bear market, and it’s likely that the market could get worse before it gets better. Because of this, Canadians are likely asking not just when the market will recover but when a bull market will come back.

Take a look back

If you’re wondering first when we might recover from a downturn, the first step you can do is look back at how the market performed historically. Remember, we’re not even in a technical recession yet. But by historical accounts, a downturn followed by a recession usually takes place an average of 17 months.

We can take a look at how the market has been performing over the last few years to see how much longer we might have to go. Shares started to fall in April 2022. That means we’re about 10 months into a downturn and could have about seven more to go.

Consider economist outlooks

Now that we’ve looked at the average, it’s important to look at what economists are predicting. These are people who have studied this for years, if not decades — many of whom believe that a recession could be a “mild” one.

What is a mild recession? For that we need to consider what makes a recession in the first place. A recession is defined by two consecutive quarters of negative gross domestic product (GDP) growth. We have yet to see a decrease in GDP, though growth has certainly slowed.

In that case, the next GDP report will be in March. Should this prove to come in at a loss, then it would be May when a recession is announced. Only then could we start to potentially see positive movement if we truly go through a mild recession.

What does this mean?

By the summer, Canadians will have a much clearer picture about whether we’re going through a recession and if it’s bound to continue through to fall or not. By September, we could see shares return to pre-drop prices, if we hit those 17-month averages discussed. However, it could be even less!

That being said, by the summer, we could see an improvement in market performance. That could be the start of a bull market that investors will want to get in on. If that’s the case, you can prepare for this rebound by investing in strong, cheap stocks.

Stocks I’d choose

The top companies I would choose right now for a bull market recovery are goeasy (TSX:GSY), Teck Resources (TSX:TECK.B), and Shopify (TSX:SHOP). Each are going through a downturn that won’t last long, and certainly will soar in a bull market.

goeasy stock has strong financials and is also a Dividend Aristocrat, providing decades of growth in the field of loans. Despite being around that long, it continues to beat out estimates and create record performance.

Teck stock is another great option, even during a recession, as it provides investors with access to basic materials growth. It should also do well in a bull market, as the company continues to expand and grow, providing investors with a valuable price for future growth.

Finally, Shopify stock is down after poor earnings, but has decades of growth ahead. Once consumers latch back on, the company is bound to see major improvements to its bottom line. So, this is definitely one to recover in a bull market.