To my clients:
If you prefer, read this week’s update on my website. Feel free to share the link with family, friends and colleagues:
It was an up week for North America stock markets with the Canadian TSX finishing up 1.0%; the U.S. Dow Jones Index up 0.7%; and the U.S. S&P 500 up 1.1%.
I remain in the thick of annual reviews with clients, so again a short point-form update this week:
- Economic growth continues, with U.S. 4th Quarter GDP at 3.3% coming in well ahead of expectations of 2.0% (this is real GDP meaning that this growth rate was over and above inflation)
- The Fed’s preferred inflation measure, the Core PCE Price Index came in at 0.2% for the month of December; for the past 9 months the annualized rate now sits at 1.9%... BELOW the Fed’s 2.0% inflation target. The 3 month annualized rate is even lower at 1.5%. Rate cuts ARE coming.
- On rate cuts, it’s important to realize that even though the Fed has not further raised rates for several consecutive meetings, the fact that inflation is coming DOWN while rates remain the same actually means that a phenomenon known as PASSIVE TIGHTENING is happening. Passive tightening means that “real” interest rates (over and above inflation) are actually increasing because inflation is coming down. The Fed will not want this phenomenon to persist.
- Take away messages: the economy remains robust while inflation comes down. This bodes well for market expectations in 2024 (although the late 2023 market surge has already captured some of this economic good news).
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com
Visit Our Website: www.nickscholte.ca
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