Markets
The first six months of the year were stronger for the stock markets, and the economy, than many economists had expected. Notwithstanding bank failures, debt ceiling drama, and geopolitical fears, most markets are higher year-to-date. For the first six months of 2023, the Toronto Stock Exchange was up 5%, the Dow Jones was up 4% and the S&P 500 was up 16%. However, the vast majority of the gains, especially for the S&P500, were driven by only a handful of stocks. Those in the artificial intelligence space – including Microsoft, Nvidia, Alphabet – are considerably higher today than they were six months ago. Many are up over 50% year-to-date! Strong employment, resilient GDP reports and high levels of consumer confidence have contributed to the economic success of 2023. The ‘soft landing’ for the economy that central bankers were trying to achieve has been willed into reality – at least for the time being.
There Is An Alternative - TIAA
In the past, we have written about the acronym TINA (There Is No Alternative) - to stocks, that is - because interest rates on bonds and GICs were very low. Clearly, with higher interest rates, there is an alternative now. Purchasing and holding bonds paying 5%-6%, especially bonds that have part of their return in the form of capital gain (as opposed to solely interest income – as is the case for GICs), has been the strategy of many recently. We suspect interest rates will remain at elevated levels at least through the end of 2023. Until inflation decreases closer to 2% (the target for the Bank of Canada) interest rates will likely not decrease in a meaningful way. As of now, markets are expecting interest rates to begin decreasing in the second half of 2024.
Russian Instability
Following the recent revolt by Progizhin and the Wagner Group, Putin’s regime is seemingly less stable today. Furthermore, with oil prices falling recently, the Russian government is currently operating in a budget deficit – putting additional pressure on Putin. However, according to the research firm The Bank Credit Analyst, China will continue to support Russia. We note there is an election planned for Russia in March 2024. This one might be more interesting than prior sham elections!
Pearlstein Wealth Update
Carmen had a baby boy, Miles, in April, and Alicia had a baby boy, Jaxson, in May! We are happy to report that Carmen, Alicia, and their babies are doing well! Our summer student, Charlie, has also been a very welcome addition to the team.
Wishing everyone a great summer!
Pearlstein Wealth
