Skiing, ice cream, and the markets

 

Good day.  I trust the start of 2024 has been good for everyone and that the year will be the best ever for you.  Don’t forget to build in lots of fun and adventure.

 

Sorry for the delay in getting a new blog written.  The team and I have been busy reviewing our securities holdings and models and beginning the process of reviewing all client portfolios to start the year.  It’s a fairly large, and intense project, which generally takes a good month or two.  I can report that we really like all our stock and bond holdings.  We are about to add some more AI exposure to the portfolio but only in a small way as we already have good exposure to this secular theme.

 

Client portfolios saw strong gains by the end of last year.  We pretty much recovered from the 2022 downturn.  It was a welcome relief after a tough couple of years really.  Portfolios held up really well in comparison to the markets, however, it seemed to take a long time for them to recover. 

 

The stock and bond markets are holding up well to start the year so far.  There was a slight dip to start the year and a slow grind upward after that.  Investors are still very positive about central banks potentially cutting rates in the near term and that the global economy is doing quite well, but not too well.  A soft landing and mild recession are still a very real possibility.

 

I would assert that economic data remains strong enough that rate cuts will take longer to come about than everyone might think.  Consensus was for March this year and has now been pushed to June or July.  I think investors are going to have to temper their expectations a little although the trend to lower rates will keep everyone feeling positive on the markets.

 

Central banks will be extremely hesitant to cut rates too soon which might cause the economy to surge, and result in them having to raise rates again.  They are going to take a slow, measured approach to cutting rates.  At least globally, central banks are talking cuts and not raises.  It appears we have reached peak rates for this cycle.

 

The Bank of Canada held steady on interest rates this week, while the Federal Reserve is expected to do the same next week.  I am hopeful that rates will come down enough in Canada to avoid the looming crisis in mortgage renewals in 2025 and 2026 when 58.3% of all mortgages come due.  Central Bank prime affects variable rate mortgages directly.  They only influence longer term mortgage rates and do not set those rates.  Commercial banks set mortgage rates based on bond market rates.  These have already come down somewhat since November 2023.  Five-year mortgages have moved from 6%+ to around 5%.  That is historically not too bad.  Many of us can remember mortgage rates in the 15 – 20% range back in the day.  And many of us only know mortgage rates as 1 – 2%.

 

Trump appears to be holding up well as the Republican nominee for the November election despite Nicky Haley’s attempts.  He is not polling well with moderate conservatives however and polls are showing Nicky has a better chance of beating Joe Biden in the election than Trump does.  Nicky raised more money for her campaign than Donald did in the last month.  The Republicans need an alternative to Trump if he gets convicted on any of his 91 charges.  48% of his supporters don’t think he should be president if he is convicted.

 

I encourage all my clients to seek adventure and travel.  However, I would suggest you avoid Illinois and the Mid West in April.  A double swarm of one trillion cicadas is set to emerge in the region.  Yikes!  Creepy.  This double cohort has not been seen since 1803.  Don’t go there.

 

Speaking of travel, Denise, Addison, and I were in Stowe, Vermont over New Years for some skiing.  Like here, there was no snow and conditions were poor.  We did manage to get out a few times however.  Oh course we visited the Ben and Jerry’s Ice Cream factory for some yummy treats.  And we went snowshoeing (well more mud than snow) at the Von Trapp Family Lodge.  That was after we watched the Sound of Music again.  Ha.

 

Unfortunately, I caught a cold and cough just before Christmas and I couldn’t shake it for about three weeks.  Back to full strength now.  That’s a good thing as we are undertaking an 80 day challenge with our workout group whereby we work out at least 30 minutes everyday and do 5 mins of abs.  No missed days so far and we are more than three weeks into the challenge.

 

Collingwood has seen some good snow over the last couple of weekends thanks to snow squalls off Georgian Bay.  I shovelled a LOT of snow and figure 20 cms fell each weekend.  I am not sure how this year’s February thaw is going to affect conditions on the hill.  I am heading up there after this blog to ski for the weekend.

 

Don’t forget the NFL conference championships are on this Sunday.  Yeah!  I know where I will be perched for the games.  Four great teams left.

 

I hope everyone has a great weekend.  Catch you later.

 

Be well.

 

Miles…