January Update
I hope everyone had a nice holiday season and enjoyed some time with family and friends, likely over a nice meal. My son came home for Christmas and we enjoyed having him here. He is back in Halifax now to take in a game or two of the World Juniors hockey tournament. What a game last night! This is very exciting and big for Halifax.
The Markets
The TSX declined 4.73% in December and down 8.5% year to date.
The S&P500 declined 4.6% in December and down 19.44% year to date.
The tech heavy NASDAQ declined 6.38% in December and down 33% year to date.
From our Portfolio Advisory Group (December 9, 2022)
The recovery in global stock markets that transpired through most of November has started to fade with the arrival of the final month of the year. Despite recent rate hike announcements, there continues to be a growing view that central banks are nearing the final stages of their rate tightening campaigns. But, any resulting optimism is being countered by the realization that we are also inching closer to the point where tighter financial conditions start to weigh on demand and overall growth.
We take the opportunity below to summarize some key thoughts that have been discussed in our firm’s flagship investment publication: The Global Insight 2023 Outlook. As always, it is worth a read. It has contributions from some of our firm’s key investment resources from around the world.
As mentioned in the feature article, a U.S. (and global) recession is on the way. Historically, recessions eventually arise after interest rates move into restrictive territory, which is the case today. The likelihood of one occurring over the next year is high given the signals emitted by key leading indicators. The exact timing may be harder to assess, but our firm’s view is that an economic contraction should arrive in North America around mid-year.
There are short and long-term takeaways to keep in mind. In the short-run, recessions, particularly those in the U.S., have typically coincided with “bear markets”. And so, investors should expect further bouts of stock market pressure next year. Moreover, negative news and weak sentiment can become pervasive during these kinds of periods. It often requires a level of discipline and longer-term thinking.
Fortunately, when reflecting on the long-term, there are a few simple but important lessons. First, recessions on average don’t last too long, and the mere anticipation of a recovery is often all that is needed to begin a new bull market. Moreover, as time passes, any investment impact from recessions tends to be widely overshadowed by the gains that follow thereafter. Overall, recessions have generally presented themselves as mere blips on the longer-term upward trajectory of stock markets.
Despite the backdrop, a silver lining has emerged in fixed income. While bond returns have been historically weak over the past year, it’s important for investors to focus instead on forward looking prospects. Bond yields are now at highs not seen in well over a decade. As a result, the return expectations from fixed income going forward are meaningfully higher than they have been in quite some time. Importantly, their diversification properties and ability to add ballast to portfolios may re-emerge as an important benefit for portfolios with the arrival of recession-like conditions.
The year 2023 should bring its fair share of challenges. Nevertheless, we remain confident in our portfolio management approach which continues to lean on maintaining an asset allocation that is aligned with your financial plan, rebalancing accordingly, and consistently reviewing all positions to assess quality and appropriateness. We expect income will be an important source of returns in the year ahead, and seek to explore opportunities in areas like fixed income and dividend oriented equities.
Global Insight 2023 outlook is attached.
Wealth Management
Our firm has been putting out some good podcasts and the most recent one I listened to is called Matters Beyond Wealth from Dec 20 – Contentious Estates. This podcast is hosted by Leanne Kaufman, President and CEO of Royal Trust. Her guests are two lawyers who discuss what can happen to your executor and beneficiaries when settling an estate goes wrong.
We also have RBC Global Asset Management podcasts, and RBC Capital Markets – Markets in Motion Podcast for those interested in market related topics.
I also listen to The Daily from the New York Times every weekend morning where they discuss topical current event issues.
These podcasts can be found on Apple Podcast and/or Spotify.
2023 has some updated numbers for your finances; the TFSA contribution limit is increasing to $6500. The deadline for RRSP contributions to count towards your 2022 taxes is March 1.
I am attaching 2023 Handy Financial Planning Facts with all the latest numbers that are available to date as well as early 2023 tax tips.
Client events
I am hosting a Market & Economic Update event on Thursday February 9, 2023 at the Whitby Library at 12 noon. The guest speakers are Dominick Hardy, Head of Canadian Equities and Gopa Nair, U.S. Equities, from our Portfolio Advisory Group. Please RSVP or contact colin.vellozo@rbc.com to reserve your spot.
In the Community
RBC is a big supporter of community events and sponsorship across Canada. Internally we have a RBC Employee Giving campaign through “My Community”, a program for employees where we are encouraged to donate time and/ or money to a local charity of our choice and there is a partial matching program from RBC. This year I donated my time & money to Simcoe Hall Settlement House in Oshawa where we helped assemble 800 food boxes for individuals & families in need at this time of year. My office also sponsored 2 local families and donated over $2000 to Simcoe Hall. I also donated some money this year to The Salvation Army which is located in my neighborhood and used to run sleigh rides for kids when my boys were young. We have fond memories of those events. I also donated to Hearth Place and the MS Society.
I wish everyone a healthy and prosperous 2023!