The Markets
Happy New Year!
2023 turned out to be a much better year on the market than most expected. With the aggressive interest rate increases from both The Bank of Canada and The Federal Reserve, people were calling for recession in 2023. We seem to have landed on the proverbial “soft landing” and time will tell.
And fixed income rallied from late October to close of the year and the Canadian Universe bond index rose by 6.47% year to date. The rally was in response to messaging from the Bank of Canada and the Federal Reserve for no further interest rate increases.
November was the best month in 30 years for a 60% equity/40% fixed income portfolio (balanced) from both equities and fixed income rallying.
From our Portfolio Advisory Group (Dec 15, 2023)
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. See attached.
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.
What’s in store for 2024? Our firm’s 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.
Our approach to managing portfolios in 2024 will be consistent with this past year: treading more cautiously than normal given the range of potential outcomes discussed above. We expect to remain patient with the equity allocations in our portfolios, believing that the window of vulnerability that lies ahead will prove to be temporary. On the fixed income front, we continue to look for opportunities where appropriate to take advantage of higher yields that are available.
Wealth Management
A few new numbers out for 2024:
The TFSA contribution limit is $7000
The RRSP contribution limit for 2023 is $30,780 and February 29, 2024 is the last day to contribute for the 2023 tax year.
The RRSP contribution limit for 2024 is $31,560.
These limits depend on income and if you are in a pension. Please refer to your Notice of Assessment.
The Years Maximum Pensionable Earnings (YMPE) is $68500. This is the maximum amount on which to base CPP contributions.
For those with RIF accounts, your RIF evaluation will be available online when available in early January and RIF evaluation letters will be mailed in late January. RIF payments are a calculation based on the market value of your RIF account after close of business on Dec 31 x a multiple of your age.
Here is a link to our Tax Planning Guide which outlines when tax packages will be mailed or uploaded to your Wealth Management online website. Tax reporting guide – RBC Wealth Management
In the Community
Our office supported two families through Hearth Place and two children through Simcoe Hall Settlement House. Picture attached of some of our staff and the gifts we collected.
RBC also has an employee giving where we can log our donations. Our Oshawa and Pickering location collectively donated $11,308 to charities this year!
Upcoming, our office is doing a blood drive in January.
I am volunteering again this year on the Hearth Place annual Gala committee. Our gala will be held on April 13, 2024. If anyone is interested in attending, or volunteering or donating please reach out to either me or Danielle Carroll directly at Hearth Place danielle@hearthplace.org
Team Notes
A quick note on client requests for funds. We normally have to sell when clients request money be sent to them. There is a 2 business day settlement period on the trades and if the money is coming from a registered account, our back office has to process the withdrawal which can take and extra day or two. Hence 2-4 days to get money out to you and if you bank at a bank other than RBC, it can take overnight for the funds to get to your bank account.
Our office and the markets are closed on January 1, 2024. Kim is off on Thursday January 4 and Friday January 5th. I will be working.
I wish everyone good health & happiness in 2024!