To my clients:
It was a mixed week for North American stock markets with the Canadian TSX finishing down 0.4%; the U.S. Dow Jones Index up 0.04% (note the extra zero); and the U.S. S&P 500 up 1.4%.
This was perhaps my busiest week of annual client reviews, so it will be a brief point form update this week:
Broad messaging remains the same in that a positive year ahead for stock returns is anticipated, although not likely as good as 2023
Continued declines in inflation and, correspondingly, reduced interest rates will be key to a positive outcome for stocks in 2024
Market probabilities suggest the first rate cut will come at the Fed’s upcoming meeting in May; recent cautious comments from Fed Chair Jerome Powell have seen probabilities of an earlier March cut fall precipitously
The majority of my clients are “discretionary” (meaning that I make the investment decisions according to an agreed upon Investment Policy Statement with clients); I have a smaller subset of non-discretionary clients (many of whom were transitioned from another advisor). The non-discretionary clients saw meaningful portfolio underperformance in 2023 owing to BOTH a Canadian centric AND dividend centric portfolio mix. I reiterate that prudent geographic diversification (predominantly in the U.S. although internationally as well) COMBINED with stylistic diversification (i.e. growth stocks supplementing pure dividend payers) is likely to achieve better long term results. This was certainly the case in 2023.
Last note coming across the news wires this morning: Open AI, and its CEO Sam Altman, are in the preliminary stages of seeking a $7 trillion (yes, TRILLION!!!) investment to seed a massive expansion of chip capacity for artificial intelligence applications over the coming decade. Details are sparse at present, but this has my attention. Such investment, and the implications it would have for the valuation of any such company funded with $7 trillion in CASH is truly unprecedented. I’ll follow this story with interest, although its sure to be a multi-year project.
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
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