Happy Holidays from the Mah Investment Group!

Ed & John have taken the time to reflect on the past year.  Here are their thoughts…

2022 was the year of cleanup:  the world started its full reopening, with people resuming some “normal” (but forever-changed) semblance of their pre-pandemic lives, and central bankers had to deal with the effects of this recalibration, manifesting via inflation rates not seen since the 1980s (peaking at 8.1% in Canada and 9.1% in the US).  The dramatic inflationary pressure on the economy was driven by fractured supply chains, pent-up demand resulting from the pandemic lockdown, and the war in Ukraine.  To combat these economic forces, central bankers around the world began rapidly increasing interest rates to slow spending in the hopes of preventing prices from spiralling out of control due to unchecked inflation.

Fast forward to 2023, and we have the beginning of the next chapter of the post-pandemic economy.  In 2023, we started to see the effects of these interest rate hikes, but there have been notable global events that have happened throughout the year which have made the road to recovery a bumpy one.

In March 2023, we recall the failing of 3 regional banks in the United States: Silicon Valley Bank, Signature Bank and First Republic Bank. Thankfully, the U.S. government ensured that all affected clients’ deposits would be honored, so the fallout of the collapse was contained. The result of the failure of these banks was a pullback in the price of banks stocks generally (including Canadian banks), but has caused increased scrutiny of regional banks, which will hopefully result in better regulation moving forward.

Despite the challenges faced by the banking industry, one sector in particular has led the market recovery in 2023: technology. The “Magnificent Seven” – America’s biggest tech stocks accounting for approximately 30% of the S&P 500’s market value – are responsible for most of this growth, with the likes of Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia seeing gains between 50% and 219% in 2023. The other sectors of the market have not fared as well, with some sectors even falling further than they had in 2022. This is nothing to be nervous about but might instead be seen as indicative of more potential recovery to come in 2024 and beyond.

One factor fueling the growth of the Magnificent Seven in 2023 was the revelation of the practical applications and possible future promises of artificial intelligence. The advent of widely available AI systems will lead to the automation of many tasks that would otherwise require a human brain to be accomplished. The hypothetical applications of AI have the potential to overwhelmingly increase economic productivity and improve our daily lives. However, as with any revolutionary technology, there is the need to consider the unintentional consequences of its introduction into our world, as demonstrated by the U.S. Congress beginning to deliberate on how best to regulate this technology.

Despite the exciting developments that happened in 2023, we continue to contend with heartbreaking world conflict. The unthinkable terrorist attack on Israel and the ongoing war that has ensued continues to impact families across the globe, including many of those within our own lives. The war in Ukraine also saw it’s one year anniversary come and go, with no end in sight. We can only hope for the resolution of these conflicts to bring lasting peace.

Overall, 2023 was an interesting year. Despite many surprises along the way, our clients’ portfolios have seen recovery from the difficult year of 2022.

We continue to believe that this recovery will continue into 2024.  Jay Powell, the U.S. Federal Chairman, assisted in this recovery with his remarks of December 13 indicating three rate cuts in 2024.

Brian Belski, our Chief Investment Strategist, is forecasting a price target for the S&P 500 of 5100.  This would represent an 8% increase from its Friday, December 15, 2023 close.  For the S&P/TSX, his price target is 23,500, up a whopping 14% from its Friday close.  Canada will be the surprising snap-back performer as negativity is so pervasive on our market.

Finally, we are encouraged by the efficiencies offered by AI.  Productivity will be the driving force in market growth as AI streamlines how we do business in the future.

As always, the markets never move in a straight line.  There will be moments of volatility that will shake your confidence in us and our forecasts.  As time passes, we will be proven correct, and along the way, we will always be here to guide you through any troubling times.

This holiday season, we hope you fill your bellies with delectable treats and share wonderful meals with  your loved ones (and in turn, help fuel the ongoing gains in Novo Nordisk, thanks to the popularity of Ozempic this year).

From the Mah Investment Group, we send our deepest thanks and warmest wishes for a holiday season of peace and happiness and a healthy new year.

Check out Brian Belski’s 2024 Market Outlook:

Canadian Outlook

US Outlook