In this week’s economic update and our last newsletter of the year, we are 'wrapping' up with a summary of 2023. We give a brief overview of the year that was, our thoughts on 2024, and how we will be approaching the upcoming year from a portfolio management perspective.
We are including a short holiday video message from our Senior Portfolio Managers, Jay Elinesky and Tom Schuett, as well as some details to remember for our holiday hours.
From the entire team at Elinesky Schuett Private Wealth, we are wishing you a happy and healthy holiday season, and all the best for 2024.
Economic Update
It is hard to believe, but 2023 is coming to an end. Fortunately, both global equity and bond markets appear to be finishing the year on a strong note. This strength can be attributed primarily to two factors. First, the rate of inflation continues to show signs of moderating, raising expectations that central banks are at the end of their rate hiking cycles. And second, while growth has slowed – in some areas more than others – economies have generally handled the challenges better than expected. Below, we step back and briefly review 2023. We also look ahead to 2024 and profile our firm’s flagship investment publication, The Global Insight 2024 Outlook.
A year of remarkable resilience
While 2023 had its ups and downs, it has proven to be a year of economic and market resilience. On the economic front, growth has slowed but there have been positive surprises, especially in the U.S. where the consumer has been stronger than elsewhere. The inflation backdrop has meaningfully improved, transitioning from an accelerating rate last year to a decelerating one currently. This led to a better investing experience this year as volatility declined, as it historically does when inflation falls from high levels. Lower inflation and volatility have been welcome developments in the bond market, where returns have been more normal and favourable compared to last year. Equities have also seen reasonable returns, with some markets performing better than others, driven particularly by large cap technology stocks. It is worth noting that the breadth of stock market gains improved towards the year’s end, suggesting more stocks have been participating in the rally of late.
Looking ahead to 2024
What’s in store for 2024? RBC’s Portfolio Advisory Group and investment team believes the combination of high rates and restrictive lending standards is a recipe for a recession, particularly in regions like Canada and Europe where growth figures have been underwhelming. There is the chance the U.S. and other regions avoid a recession, and instead experience a “soft landing”, where growth slows but does not outright decline. In such a scenario, earnings would not decline, but would keep growing, more modestly, and help the equity market generate further gains. Nevertheless, the range of potential outcomes for equities over the next year remains wider than normal. Meanwhile, bond yields are significantly higher than they have been in some time which has re-established their role in portfolios. More specifically, bonds of high-quality issuers such as governments and highly rated companies now offer reasonably attractive levels of income combined with the potential to shield portfolios to some degree from any resurgence in volatility should a recessionary scenario develop.
Approach for 2024 remains the same
Our portfolio approach in 2024 will be consistent with previous years: a focus on well-managed companies with a track record of growing revenues and profits over time, with strong balance sheets, and a sound long-term strategy. Despite the range of potential outcomes discussed above, we are confident in our equity allocations and will continue to proactively look for opportunities in both equities and fixed income that meet our clients’ needs.
Happy Holidays and New Year - a thank you from the team at Elinesky Schuett Private Wealth
2023 can be defined by its inflationary policies, rising interest rates, and overall economic challenges and rising costs. To navigate these choppy waters requires a purposeful and disciplined investment approach that is focused on the long term.
We appreciate and want to thank our clients for the trust you place in us to guide you through these turbulent times to protect your wealth and legacy.
We have put together a short video message from Jay Elinesky and Tom Schuett – you can watch that video message below:
Holiday Office Hours
As a reminder, our offices will be closed on December 25th, 26th, and January 1st. Between December 27th and December 29th, we will be open and ready to serve you from 8:30am to 4:30pm should you require immediate assistance. During this time, you can contact us by calling our main line at 519-822-2024 or by e-mailing us at elineskyschuett@rbc.com, and one of our associates would be happy to help you.
As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or elineskyschuett@rbc.com.