A Closer Look
Here’s a closer look at the factors at play and what we might expect in 2024:
Global economy: High interest rates are likely to have weakened the global economy. We believe we’re likely to experience a further slowdown in early 2024. Low unemployment and strong business growth in the United States suggest a mild-to-moderate recession is probable. Canada’s economy is much more sensitive to interest-rate changes and, therefore, could be more vulnerable.
Inflation: Higher interest rates may have slowed growth and eased inflation as intended, but the last leg of the inflation battle may be more difficult. As it stands, inflation at current levels could set the stage for central banks to pause the rate-hiking cycle and eventually cut interest rates in 2024.
Geopolitics: Investors have been losing sleep over the conflict in the Middle East, which erupted in October, in addition to the ongoing situation in Ukraine. Historical market trends often show that geopolitical events can cause short-term volatility, but markets tend to recover over the longer term.
The Plan Forward
So, if there is a potential recession on the horizon, what should we do? Over the coming year, we believe both equity and bond investors will benefit from falling interest rates, translating to rising stock and bond prices. However, there’s likely to be fluctuations along the way as the market responds to unexpected economic data. Staying invested is the best recommendation as evidenced by the two graphs below for 2023.
Source: Bloomberg. As of December 31, 2023
Source: Bloomberg. As of December 31, 2023
Source: Bloomberg. As of December 31, 2023
An Opportunity
Now is not the time to feel paralyzed as an investor. In fact, historical trends suggest that this could be an opportunity. While past performance is not an indicator of future returns, history shows that investing in robust, resilient companies during periods of volatility can lead to favourable outcomes over the long term.
CFP, CIM, FCSI, CHS, RIS
Director, Wealth Planning Services | Caldwell Wealth & Estate Advisory Ltd.
Investment Advisor | Credential Securities
Along with helping people prepare for their financial futures through solid financial planning, Dan curates and manages the investment options for the firm.
Disclaimer
Material in Dan’s articles was prepared solely for informational purposes, does not constitute a recommendation, professional advice, an offer or an invitation by or on behalf of Caldwell Wealth & Estate Advisory to any person to buy or sell any security or adopt any investment approach, and is no indication of trading intent in any fund or account managed by Caldwell Wealth & Estate Advisory. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Diversification or asset allocation does not guarantee a profit or protect against the risk of loss in any market. Unless otherwise specified, all data is sourced from Caldwell Wealth & Estate Advisory. Past performance does not guarantee future results.
Mutual funds, other securities and securities-related financial planning services are offered through Aviso Wealth, a division of Aviso Financial Inc. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.
0 Comments