A signboard displays the TSX close in Toronto on June 4, 2021.Frank Gunn/The Canadian Press
Are stocks out over their skis? With Canadian stocks up nearly 8 per cent year-to-date (including dividends) and U.S. stocks up almost 12 per cent, the bears see an average year’s gains already and are sure little good will come in 2024′s back half. But they’re wrong.
While Canadian stocks have averaged about 9.5 per cent in annualized long-term total returns, echoing U.S. average returns of 10 per cent, both usually deliver far higher or lower returns each year. The averages smooth out the performances of much more volatile extreme years, combining mostly big positives with fewer negatives.
Statistically, average returns aren’t normal – extreme returns are normal. And so the current strength in stock markets is shockingly normal. Let me explain.
Most people equate volatility with negativity. But volatility is…
