2022 was a challenging year, with most leading economies experiencing significant increases in inflation, while also suffering the dual negative impact of the rising interest rates designed to quell it. Key central banks, from the U.S. Federal Reserve to the Bank of Canada to the European Central Bank, were forced into action to contain inflation. That’s because their historically accommodative monetary policies, designed to spur borrowing, investment and growth in the aftermath of the negative shock of pandemic health measures, sparked a historically large surge in demand and prices for goods and services. A third shock to the global system came with Russia’s invasion of Ukraine, which caused energy prices to soar.
The combined effects of inflation, rising interest rates and energy price volatility are likely to drive the economy into recession in the first half of 2023, although our forecast is that it will be fairly mild and short, giving way to a stronger second half.
Despite the clear challenges ahead, the economic outlook continues to support the view that these difficult times have an end in sight. While the last year has understandably tested investors’ patience and perseverance, we believe that disciplined investors will continue to enjoy long-term rewards.
As stewards of your wealth, we remain unswerving in our commitment to your success and well-being, through all economic and market conditions. Long-term investment success largely depends on the effectiveness of your overall wealth plan to help ensure you achieve your goals – and not on the short-term gyrations of markets. The New Year is a great time to assess your goals together with your Investment Counsellor so you can feel confident and secure in your future.
Happy New Year to you and yours, and we look forward to seeing you in 2023!
Regards,
Vijay Parmar
President
RBC PH&N Investment Counsel
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