Tony Dwyer, chief market strategist at Canaccord Genuity, joins BNN Bloomberg joins BNN Bloomberg for his view on the stock market as he notes cyclicals are underperforming in 2023, while mega tech stocks experience a rally. Dwyer says investors should keep an eye on choppiness given ‘something in this cycle will be unequally wrong’.

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BREAKING: Recession News

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If a recession occurs, the market will face new lows

The global economy has been hit hard by the COVID-19 pandemic, with many countries experiencing a significant decline in economic growth. As businesses shut down, unemployment rates rise, and consumer spending plunges, experts are concerned that a recession is looming on the horizon. If this recession does occur, it is highly likely that the market will face new lows.

During a recession, consumer confidence is shattered, leading to reduced spending and a decline in demand for goods and services. This decreases companies’ revenue and forces them to lay off employees and reduce production. As a result, stock prices plummet, and the market experiences significant downturns.

One of the key factors that affect the market during a recession is the declining corporate profits. With reduced consumer spending, companies witness decreased sales, making it difficult for them to generate revenue. This translates into lower profits, which in turn affects their stock prices. Investors become skeptical of investing in companies that struggle to maintain profitability, leading to a sell-off in the market.

Another aspect that impacts the market during a recession is investor sentiment. During periods of economic uncertainty, investors tend to become risk-averse and search for safer investment options. This results in a movement away from stocks and towards safer investments, such as bonds or gold. As the demand for stocks declines, their prices drop, causing the market to plunge even further.

Moreover, during a recession, Central Banks often implement measures like interest rate cuts to stimulate the economy. While this can provide some relief for businesses and households, it also has a negative impact on market sentiment. Lower interest rates can make bonds and other fixed-income securities more attractive, sparking a shift away from stocks. As a result, the market experiences further declines.

Furthermore, global trade is severely disrupted during a recession, with countries imposing protectionist measures and trade barriers. This restriction in trade negatively affects businesses that rely on imports and exports, amplifying the overall economic downturn. Reduced international trade leads to a decline in revenue for multinational corporations, and consequently, their stock prices suffer.

However, it is essential to note that not all sectors and industries are affected equally during a recession. Some industries, such as healthcare, pharmaceuticals, and consumer staples, tend to be more resilient during economic downturns. Their products and services are considered essential regardless of the economic situation, thus providing a level of stability to investors.

In conclusion, if a recession occurs, the market will face new lows. The declining corporate profits, reduced consumer spending, investor sentiment, interest rate cuts, and disrupted global trade all contribute to the deterioration of the market during an economic downturn. While some sectors may fare better than others, it is crucial for investors to exercise caution and adapt their investment strategies accordingly during these challenging times.