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2024 Market Outlook ‘Uncovering the Potholes & Express Lanes of the Journey’

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January 15, 2024

“Bull markets are born on pessimism, grow on skepticism,

mature on optimism and die on euphoria.”

                                                         - Sir John Templeton

Good Afternoon:

I know what you are thinking; “Aaron you started your ‘2023 Market Outlook’ email with the same quote. Be more creative!”

It’s true, just as is that powerful, time-tested statement is. The bull market that started in October 2022 was merely born on pessimism and continued to flourish, notwithstanding some turbulence, in 2023 as we continued to climb ‘the proverbial wall of worry’ higher on skepticism.

After bouncing beautifully off the autumn mini correction, the fourth quarter of 2023 felt the effects of optimism kick in as inflation continued to show signs of cooling and central bankers signalled not only a pause but opened the door for rate cuts in 2024.

While many investors have begun believing, the doubters remain present. The bears are trying to label what has transpired in the markets as investors on a ‘sugar high’ reliant on rate cut optimism and AI euphoria. While conflicts continue to persist in the Middle East, China trudges and Europe lags, the narrative of the bears persist.

What they do not understand is that young bull markets are hard to kill. As it celebrates its first year, like this one has, they almost always celebrate a second birthday. In fact, if we look at the historic data and coming off the robust gains of 2023, the 2024 prediction of double-digit world market gains with further broadening in the market as the year progresses assisted by a resilient economy and political tailwinds paving the way is how I think this plays out.

In the meantime, we find ourselves bouncing back and forth between skepticism and optimism - it really depends on what the news of the day or economic data point is released. While I do not have a crystal ball, I do have a suspicion that 2024 will be a positive experience for investors for a variety of reasons.

Here's a closer look at the factors at play and what we should expect in 2024:

Global economy: High interest rates are likely to have weakened the global economy. We believe we’re likely to experience a further slowdown in early 2024. Low unemployment and strong business growth in the United States suggest a mild-to-moderate recession is possible. But then again, economists have been suggesting we are 3 months away from this ‘recession’ for 18 months. On our side of the border, Canada’s economy is much more sensitive to interest-rate changes (think housing market) and, therefore, could be more vulnerable.

Inflation: Higher interest rates may have slowed growth and eased inflation as intended, but the last leg of the inflation battle is proving to be more difficult. As it stands, inflation at current levels could set the stage for central banks to pause the rate-hiking cycle and eventually cut interest rates in 2024.

Geopolitics: Investors have been losing sleep over the conflict in the Middle East, which erupted in October, in addition to the ongoing situation in Ukraine. Historical market trends often show that geopolitical events can and more often do cause short-term volatility, but markets tend to recover rather quickly.

Over the coming year, I 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.  

After a robust recovery in 2023, 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.

See attached for my ‘2024 Market Outlook’ summary to help provide you some insight. I purposely made sure it was concise to keep your attention.

Regardless of where we are in the market cycle, it’s always important to take a disciplined approach to investing and stay focused on your long-term goals. I find this strategy helps you keep your emotions out of investing, typically buying high and selling low like many investors do. The ongoing monitoring and reviewing of your portfolio also ensure it remains on track.

2023 RRSP deadline and NEW 2024 TFSA room

February 29, 2024, is the deadline for 2023 RRSP contributions. If you are looking for ways to reduce your 2023 taxable income while simultaneously helping your future self financially, please reach out to see if this is something you should consider taking advantage of before the deadline.

The new year also brings an extra $7000 you can allocate to your TFSA. This amount increased from $6500 in 2023.

Both RRSPs and TFSAs hold most types of investments. I am always happy to talk to you more about the tax-efficient advantages of RRSP and TFSA investing and discussing what makes best sense for you.

Thank you for your continued trust and for the opportunity to assist you in working toward your financial goals. I am committed to you along every step of your investment journey.

Should you have any questions regarding your portfolio and retirement planning, please do not hesitate to contact my office.

Thanks for taking time out of your busy day to stay informed.

-Aaron Pedlar

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