To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up 0.6%; the U.S. Dow Jones Index up 2.0%; and the U.S. S&P 500 up 2.3%.
As noted in last Friday’s update (meagre as it was owing to a virus I picked up), I adjusted client portfolios this week to have a greater weighting of US equities (i.e. stocks) in comparison to Canadian equities. For most clients the adjustment was modest. That said, a small handful of more aggressive clients (they will know who they are), will see further adjustments to come (with the first follow-up adjustment coming today).
To reiterate, although our internal strategists consider equity portfolios with relatively equal Canadian and US weightings to be appropriate for most clients given that the vast majority of clients are domiciled in Canada and have expenses denominated in Canadian dollars, the relative growth divergence between the two countries argues for an overweight allocation to the U.S. This heavier allocation will be continually re-assessed as time passes.
With respect to the U.S., there was little surprise in the Federal Reserve policy announcement this past Wednesday – interest rates were kept steady. However, beyond the headline, two developments were of note: 1) Jerome Powell in the press conference explicitly said that rates are probably at their peak for this cycle and the next move is expected to be lower; and 2) with respect to moves lower, the general thinking of the broader committee is that there will be three cuts by the end of 2024. While the number of cuts is less than the markets were expecting at the beginning of the year, the continued strength of the U.S. economy is affording the Fed the luxury of proceeding at a measured pace.
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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