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A simple overview of the markets in 2023

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A year that surprised many and yet again exposed why investors should be cautious when using economic forecasts to make decisions. Many experts predicted the US economy would struggle and possibly enter a recession in 2023. Contrary to these predictions, the economy remained resilient, inflation eased, and the Fed chose not to raise rates later in the year.

A year that many speculated would be poor for US stocks ended up seeing the S&P 500 index gain 26.3% including dividends.  Global stocks also bounced back in 2023 despite the continued war in Ukraine and increased fighting in the Middle East.  Stocks globally rose 22.2% as measured by the MSCI All-Country World Index.

MSCI All Country World Index (net div.) in 2023

Source: Dimensional Fund Advisors

Inflation in the US continued to retreat. Inflation clocked in at 3.1% in November of 2023 which is a significant decrease from its four-decade high of 9.1% that was measured in June of 2023.  After three increases early in the year, the drop in inflation led to only one interest rate increase in the later half of the year. The Fed uses interest rate adjustments as a tool to control inflation. Higher rates typically slow down economic activity, helping to reduce inflation. At this time, we’ve been told by policymakers that they plan to hold rates steady, even with inflation higher than the 2% target rate.  Even though the economy continued to be strong, there were certain sectors like real estate and finance, that saw challenges with rising rates throughout the year.  These higher rates also strained areas such as home sales and development.

In Washington, politicians continued to debate the US debt ceiling and government funding initiatives. The President and Congress arrived at a deal and raised the debt limit in June avoiding a US default.  The US however was not able to avoid a downgrade in its credit rating from rating agency Fitch who cited “erosion of governance” as their primary concern. The good news for investors was the fact that stock and bond markets didn’t seem to care.  We’ll often read about the looming government shutdown in media headlines, but the implications for investors are usually minimal. The evidence shows that government shutdowns have not necessarily meant poor returns from stocks.

Moving forward

Market volatility is a function of the markets, not a bug. To earn good returns, you will undoubtedly need to also experience bad ones. The contrast between 2022 and 2023 is a prime example of this.

Understanding and planning for this volatility helps you to navigate volatile markets and avoid reacting to short-term volatility, which will save you hundreds of thousands of dollars over your investment career. An investment approach built upon evidence combined with patience and discipline is one of the most reliable and time-tested ways to create true wealth over the long term. The headlines will come and go but the keys to long-term investment success remain the same. In times of market volatility, personalized advice tailored to your unique financial situation becomes even more valuable.

If you have any questions about your existing financial plan or evidenced-based investing, I welcome you to schedule a time to chat via the link schedule your meeting . Otherwise, feel free to reach out to me by e-mail at brandt.butt@endeavourwealth.ca

- Brandt Butt, Portfolio Manager/Investment Advisor, CFP®, CIM®

Brandt is a Portfolio Manager/Investment Advisor/Certified Financial Planner and part of an award-winning team at Endeavour Wealth Management with iA Private Wealth. Brandt’s focus is working with incorporated dentists with busy schedules and who feel they need assistance making educated decisions with their money.

This information has been prepared by Brandt Butt who is a Investment Advisor/Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Investment Advisor/Portfolio Manager can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA

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