One would think with CPI rising, Fed going 75 bps, Bank of Canada raising by 100 bps and U.S. GDP posting a second consecutive quarter of negative growth that the recession chorus is growing louder and things sound dire. Yet markets have rallied this month, reinforcing the fact that the market’s starting point matters just as much as the news flow. After a terrible June, the S&P/TSX advanced 4.7%, S&P 500 9.2% and Nasdaq by 12.3% in July. Meanwhile, bond yields have dropped on recession fears. While many have complained of the positive correlation between equities and bonds this year, temporarily reducing the efficacy of portfolio construction, positive correlation is nice when everything goes up.

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