A few topics our newsletter touches on this month:

• Our Thoughts: Outlook 2024
• By the numbers: December & Calendar Year
• Other Links: Disruptors podcast, Global Insight (monthly & 2024 outlook)

Our Thoughts:  Outlook 2024

Progress against inflation  ignited both bonds and stocks at the end of 2023, as the need for additional tightening of monetary policy is removed. While the threat of recession in early 2024 remains due to the lagging impact of  prior rate hikes, the next cycle, after the inflation battle is over, is coming into view.  Still, 2024 challenges include:  the excess savings built up during COVID are working down/spent; corporate financing is now more expensive reducing profit margins and the consumer has to deal with higher interest costs affecting their discretionary consumption.  For the stock market there is also a new kid on the block competing for funds from  conservative investors – bonds are finally back to paying a half decent yield.  The artificially low interest rates that were a tax on retirees in order to support the economy is now over.  Of course central banks are aware of all this  and they are  expected  to start pivoting soon and cutting rates as inflation ebbs; this combined with earnings advances and a soft landing  scenario argue for continued market strength.  Regardless, we take the view that a focus on quality businesses with strong balance sheets, and a business model with pricing power along with sustainable dividends offer attractive long term returns from current valuations.

The end of the year is also a great time to take stock of where you are relative to your goals and expecations.  We are happy to answer any questions you may have.

By the numbers (December):  The TSX was up 3.9% and the S&P 500 was up 4.5% in U.S. dollars (2.1% in $CAD). The Europe, Australia & Far East index (EAFE) was up 2.8%, while the Emerging Markets index was up 1.3%. The Canadian bond universe was up 3.2%.

By the numbers (2023 calendar year): The TSX was up 11.8% while the S&P 500 was up 26.3% in U.S. dollars (23.5% in $CAD).  The U.S. market return was heavily skewed by  gigantic moves in large cap A.I. themed tech stocks ( knicknamed the Maginficant 7).  Weighting each of the returns on all of the  S&P 500 companies equally, the S&P 500 returned 11.5% in 2024. The Europe, Australia & Far East index (EAFE) was up 12.5% while the Emerging Markets index was up 4.6%. The Canadian bond universe was up 6.4%. 

Reminder: RRSP & TFSA Contribution Room

Please let us know if you are planning on making a contribution and indicate whether it will come by cheque/online transfer or if you want us to move money between your DS accounts. For discretionary clients, we will action this if we have received prior instruction. Key figures and dates to know before making your contributions:

• New TFSA contribution room for 2024 has increased to $7,000. Contributions by cheque should be made payable to RBC Dominion Securities. 
• Cumulative TFSA maximum contribution limit for an individual (if over 18 as of 2009) is $95,000.
• Personal RRSP and TFSA contribution limits can be found on your Notice of Assessment from the Canada Revenue Agency (or online through your MyCRA account).
• Maximum RRSP contribution limit for 2023 is 18% of earned income to a maximum of $30,780 less any pension adjustment. For the new year of 2024, the maximum will be $31,560.
• 2023 RRSP contributions must be made by Thursday, February 29^th, 2024.

Interesting Listening/Reading

• The 10-Minute Take – podcast from RBC Economics, latest episodes are on Canadian indebtedness and the “summer of strikes”

• Disruptors - A dynamic ~30 min RBC podcast co-hosted by John Stackhouse and Trinh Theresa Do about reimagining Canada’s economy in a time of unprecedented change.
  • Climate Crossroads: Unpacking the Dialogue in the Desert at COP28
  • Bridging the Growth Gap with AI Innovation
• To check out our Global Insight Monthly for December find the link here.
• RBC Global Asset Management’s Outlook for 2024 has been released (click the link and then scroll to bottom of the page for full document).

Regards,

Mark, Peter, Sarah, Corinne and Nathalie

Gallivan Wealth Management

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