2023 ReCap

Dan LambertCFP, 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…...
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January 29, 2024
by Dan Lambert
As we start the new year, let’s quickly review 2023. Investors faced many challenges last year, including elevated inflation, interest-rate hikes, geopolitical conflicts, and a slowing global economy. That said, those who were patient and rode out the volatility were rewarded, as evidenced below in the index return chart:
Index Returns-2023

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.

S&P 500 Price Index

Source: Bloomberg. As of December 31, 2023

Global Bond Index

Source: Bloomberg. As of December 31, 2023

As for fixed income, Bonds have outperformed GICs nearly 80% of the time. With central banks putting the brakes on rate increases and the potential for rate decreases, 2024 is forecasted to be a great year for bonds.
Bonds outperform GICs nearly 80% of the time

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.

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