To my clients,

It was an up week for North American stock markets with the Canadian TSX finishing up 0.7%; the U.S. Dow Jones Index up 1.3%; and the U.S. S&P 500 up 1.7%.

A trade was made on the U.S. side of discretionary accounts today with the sale of JP Morgan as it brushed up against our analyst target; maintaining U.S. banking sector exposure, JP Morgan was replaced with US Bancorp which still sits some 15% below our analyst target and pays a substantially higher dividend.

Relatedly, U.S. stock market and economic leadership continues and I’d expect this leadership to continue in 2024. In particular, a number of growth-oriented companies (particularly Nvidia! – unfortunately not held by discretionary clients) have seen their profits exceed expectations for the fourth quarter reporting season. Further, S&P Global Ratings raised its growth forecast for the U.S. economy in 2024, with the ratings agency raising its “REAL” (i.e. over and above inflation) GDP growth forecast from 1.5% to 2.4%. As I’ve written repeatedly over the past year, exposure to BOTH Canada and the U.S. is important, as is exposure to BOTH quality dividend paying stocks and blue-chip growth oriented stocks. As it happens, discretionary clients have exposure to all of these market segments with the majority (not all) of dividend centric stocks held on the Canadian side and the majority (not all) of growth stocks held on the U.S. side.

So, looking ahead to the rest of 2024, U.S. earnings growth is expected to pick up. Analyst estimates suggest an earnings growth rate of nearly 9% for the year. And unlike the past year, this growth is anticipated to be more broadly distributed across various companies, not just the “Magnificent Seven” [those “Seven” being Amazon, Alphabet/Google, Apple, Microsoft (all four of these held by discretionary clients) and Facebook, Nvidia and Tesla (these three not held by discretionary clients)]. This more evenly distributed earnings growth would be a welcome development, but this outlook requires consumer/business demand to remain resilient and both inflation and interest rates to come down. In fact, this is my base case for 2024, but it is not a certainty and vigilance will continue to be required (actually, vigilance is ALWAYS required!).

That’s it for this week - short and sweet. 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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