Solid Returns YTD – What to expect in 2024
After what was a dismal 2022 for both the Bond and Equity markets, we are pleased to have seen a moderate recovery across all client accounts in 2023.
The general market recovery was led, for most of the year, by a group of tech companies called “The Magnificent 7” – Apple, Microsoft, Google parent Alphabet, Amazon and Meta Platforms (formerly Facebook) – as well as two relatively new entrants Nvidia and Tesla. Even as recently as September, these 7 companies were responsible for ~90% of the returns of the S&P 500. With that, is important to remember one of the key principles of financial planning. Diversification is something that we employ at various levels throughout client portfolios – diversification of managers, styles, geographies, asset classes etc. We want to participate in the growth of the Technology sector, while also not putting all our eggs in a highly volatile basket. Having exposure to other investments will lead to more stable and predictable returns over time.
For 2024, our thoughts are that volatility will continue in the first part of the year, tapering off as we start to see rate cuts both in the US and Canada. In their most recent announcement, The Federal Reserve projected 3 rate cuts in 2024. This is a change of tune after keeping their cards extremely close to their chest for most of the past 24 months. As interest rates fall, a reversal of the misfortune we experienced in 2022 should occur. Bond prices should stabilize and appreciate (we believe there is a significant opportunity in the bond vs GIC space currently), and equity markets should respond favourably as rate cuts occur and work their way through the economy. We are confident in our managers ability to navigate these next few quarters and beyond!
TFSA’s and RRSP’s: As of January 1st, an additional $7,000 of TFSA room will be available to all Canadians 18 years of age or older. We will be reaching out to you directly to discuss this in January and February. The RRSP deadline for 2023 contributions is February 29, 2024.
