2023—the year in review
2023—the year in review, a look ahead and some important news
Happy New Year! I hope you and your family had a wonderful holiday season. This is a perfect time to look back on the year that just ended as we look forward to the year ahead.
Investors faced many challenges in 2023 including elevated inflation, interest rate hikes, geopolitical conflicts, and a slowing global economy. Those who were patient and rode out the volatility were rewarded. After several years of challenging returns, equity and bond prices rose amid signs of a slowing global economy and the possibility that central banks will begin to cut interest rates in 2024. The S&P 500, S&P/TSX Composite, and MSCI World Index were up 24.2%, 8.1%, and 21.8%, respectively in 2023. Bonds were also invited to the party—Canadian and U.S. bonds (measured by the FTSE Canada Universe Bond Index and Bloomberg US Aggregate Bond Index) were up 6.7% and 5.5%.[1]
Global Economy. The strong global economy at the beginning of 2023 was weakened by increasing interest rates throughout the year. We believe we may experience a further slowdown in early 2024. Low unemployment and strong business growth in the U.S. may slip them into a mild to moderate recession. Canada’s economy is much more sensitive to interest rate changes and therefore more vulnerable.
Inflation. Higher interest rates have slowed the economy and decreased inflation as intended, but the last leg of the inflation battle may be more difficult. As it stands, inflation at current levels could set the stage for central banks to pause and eventually cut interest rates in 2024.
Geopolitics. Investors have been losing sleep over the Middle East conflict which erupted in October, and the ongoing situation in Ukraine. While the loss of life is heartbreaking, historical market trends show that geopolitical events can often cause short-term volatility, but markets tend to recover over the longer term.
Outlook for 2024. Over the coming year, we believe both equity and bond investors will benefit from falling interest rates, translating to rising stock and bond prices. However, there’s likely to be fluctuations along the way as the market responds to unexpected economic data.
Now is not the time to feel paralyzed as an investor. In fact, historical trends suggest that this could be an opportunity. While past performance is not an indicator of future returns, history shows that investing in robust, resilient companies during periods of volatility can lead to favourable outcomes over the long term.
Important News. Manulife Wealth Inc. changed its name to Manulife Wealth on January 1, 2024. Over time, you will begin to see this new brand name appear on your statements, other communications, and information from the firm. The new name better reflects the scope of high-quality services that we provide to you and our focus on supporting you in planning and protecting your future. You may have read recently about Manulife Wealth Inc.’ new arrangement with Fidelity Clearing Canada (FCC). Subject to regulatory approval, FCC will become Manulife Wealth Inc.’ new carrying broker effective, April 1, 2024. You will receive detailed explanations from Manulife Wealth Inc. about what these changes mean for you in your year-end statement. You can also visit the MSI Information Centre for more details if you have not already. In the meantime, know that our relationship stays the same. This transformation is about equipping advisors like me with industry-leading tools and resources to deliver a better experience to clients like you. For the few items that may require action, like updating banking details or signing up for a new client portal, our office will provide you with support every step of the way. Stay tuned for updates and details in the coming months. You are our top priority, and we are committed to making this transition as smooth as possible for you.
To conclude, we are here to support you in achieving your financial goals. Please do not hesitate to contact us if you have any questions about the markets or your investments, I'm here to talk.
Warm regards,
Shawn Eliovitz, PFP,
Investment Advisor & Financial Planner
[1] Bloomberg, as of December 29, 2023