A Bounce Back Year

Heading into 2023, very few market forecasters were expecting the stock markets to have a solid year of returns. This was not surprising considering that both the bond and stock markets posted negative returns in 2022, both being negative at the same time is a very rare occurrence. Turns out 2023 was a positive year for returns and a tip of the hat to Brian Belski, Chief Investment Strategist with BMO Capital Markets, who came incredibly close with his bull case prediction for the US stock market. In his 2023 Market Outlook published November 2022, he thought the S&P 500 could finish 2023 as high as 4,800 (it was 4,080 at that time). The index closed out 2023 at 4,769. His rationale for getting to that level was:

 

“US recession is avoided as Fed gets policy spot on, inflation declines throughout the year, 10 year yield slowly declines throughout the entire year getting close to 3%. This leads to better multiple expansion, earnings are flat and maybe even GROW leading to a double-digit calendar year gain”

 

Heading into 2024, Brian Belski’s base case is for the S&P 500 to reach 5,100 and his bull case is a target of 5,500. His bull case rationale:

 

“US economy defies the vaunted yield curve indicator and avoids recession, inflation declines more rapidly than expected throughout the year, 10 year yield slowly declines throughout the entire year getting close to 3%. This leads to better multiple expansion and earnings growth to deliver an above-average calendar year gain”

 

Total Returns (C$ Values)	2023	2022	3 Year annualized	5 Year annualized
Canada – TSX Composite	11.8%	-5.8%	9.6%	11.3%
US - S&P 500	23.3%	-12.5%	11.4%	15.0%
Europe/Asia – MSCI EAFE	16.1%	-8.1%	5.9%	8.0%
Fixed Income – Canadian Bond Universe	6.7%	-11.7%	-2.8%	1.3%

Source: FactSet, values as of December 31

Best wishes for a happy and healthy new year!

 

Brad