As we quickly approach the end of July and the beginning of August, we are in the full swing of summer. The long days and warm nights are perfect for outdoor adventures, family gatherings and visiting friends. As we savour the last few days of July, there's a collective sense of making the most of these precious summer days.

Last week we had the honour of visiting the Ronald McDonald House in Hamilton. Serving as a home away from home for families with seriously ill children, the facility provides a welcoming and comforting environment for families who need to stay close to their hospitalized children receiving treatment at McMaster Children's Hospital. We were fortunate to be a part of a tour with eight other fellow RBC employees. Our group was guided through the facility showing us all of the special amenities this home offers the families. Everything from a fully stocked kitchen, to playrooms, to laundry facilities to quiet space for rest and reflection. In addition to this, the home offers regular activities and events to help bring moments of joy and normalcy to the children and caregivers, helping create a sense of routine and stability. After taking the tour, our group helped prepare dinner for the families. In essence the Ronald McDonald House stands as a testament to the power of compassion and community, offering a sanctuary for families during one of the most challenging times in their lives.

 

Market Update

The start of summer has been eventful from a market perspective. The Bank of Canada cut overnight rates for a second time by 25 basis points, to 4.5%. RBC is still forecasting two additional rate cuts by the end of 2024. Decelerating inflation trends in the US could pave the way to the first rate cut by the Fed soon. Global equities have been weaker recently, driven by a sector rotation out of large-cap technology stocks. Markets have also been digesting the historic events that have unfolded in Washington and around the world over the past few weeks. We expand on all of this below.
The Equity market has started to show signs of rotation. In some ways this development has been overdue and may be a healthy shift as “tech” has dominated market returns for a long period of time. Outside the tech sector, equity markets sit at valuation levels that are more balanced. On the fixed income front, rate cuts have started driving yields lower but levels still remain attractive in our view, and higher quality bond exposure can act as a stabilizer in portfolios in the event equity market volatility returns. We have been taking a proactive approach in regular rebalancing to mitigate the risk of overexposure to any one market or sector’s idiosyncrasies.
On the political front, a few notable elections took place across Europe recently. In France, a left-wing alliance unexpectedly came out on top in the country’s parliamentary elections. The lack of a clear majority makes it unlikely that President Emmanuel Macron can pass any meaningful legislation to address the country’s budget challenges. In the U.K., a landslide victory for the Labour party was largely expected and viewed positively, as the incoming government has advocated for “stability” in politics and policy, still somewhat scarred by the government-induced bond market crisis from a few years ago.
In the US, President Biden has decided to “stand down” and not run as the democratic nominee in the 2024 election. He has endorsed Vice President Kamala Harris as the Democratic nominee which has introduced new uncertainty with respect to the outcome of the November elections. Currently, of the two chambers of Congress, the Democratic party controls the Senate, and Republicans control the House of Representatives, both with razor-thin margins. This configuration is often referred to as “gridlock” or “divided government” because passing meaningful legislation becomes more challenging, as laws must pass both chambers and be signed by the president to be enacted. Given the unpredictable nature of the election thus far, it is premature to make any real assessments at this juncture. We will be paying close attention to the elections to get a better sense of any major policy shifts and their implications for future growth and government debts and deficits.

 

Financial Health

Summer is a perfect time to read and or listen podcasts. Diving into a financial literacy book can be especially rewarding. These books provide valuable insights into managing money, investing wisely and planning for the future. Stephanie Dean, Manager, Financial Literacy, suggests The Psychology of Money: Timeless lessons on wealth, greed and happiness. This book explores that not all information is applied the same way from person to person, or across situations. Understanding our biases, tendencies, and common oversights, we can better prepare ourselves to make financial decisions, and take actions, that are in our best interest. This book is also available in an audio book.

 

This year, Artificial Intelligence got its wings, especially generative AI, it's soaring to new heights, it's powerful, versatile and yet only partly understood. On the latest episode of RBC Disruptors, John Stackhouse visits the AI Super Session at the University of Toronto’s Creative Destruction Lab to talk with leading minds on the frontlines of Canada’s AI journey. We also sit down with Cari Covent, Head of AI at Canadian Tire to hear about how the iconic Canadian company is using AI — from robots to shopping assistants — to enhance the customer experience, improve employee productivity and eliminate mundane tasks. To better understand Canada's preparedness, RBC Economics and Thought Leadership team recently launched a new research paper: Gen AI: Is Canada ready?. AI is a prominent topic, specifically generative AI, we will continue to explore it in future blogs.

 

As we move into August, we hope that you will enjoy some travel, relaxation and be able to make the most of it.

Enjoy the rest of your summer!

 

Hayes Vickers Private Wealth