February 2023 - Monthly Update
Kaitlyn Richardson - Feb 01, 2023
The year 2023 has started off positively for your portfolio and we continue to move further away from the lows of last summer.
It appears that a more sustainable investment market recovery is underway.
The prospects for the North America economy remain strong as evidenced by the job market and corporate balance sheets.
In the United States (U.S.) 500,000 people started a new job last month as did 150,000 in Canada. A new role is created to meet the long-term interests of a company (spanning years not months), meaning these new jobs will be enduring ones. Businesses are investing in human capital as a result of their strong balance sheets and prospects for growth.
The rapid and large rise in both inflation and interest rates were two of the main negative trends last year. There was an unusually wide range of possible outcomes for the economy and investment markets. This created greater uncertainty and consequently, indiscriminate selling for stocks and bonds. Both trends have now stabilized and are on a path to once again contribute positively to your portfolio.
In 2022, inflation jumped from 0% to a peak of 9%. Today, while inflation is higher than normal, it continues to improve towards the 2% long term target. At the same time, overnight interest rates went from 0% to over 4.5%. Overnight rates have stopped going up. Markets are predicting we will see rate cuts later this year. When interest rates do begin to decrease, they will trend towards 3%. This rate is widely viewed as the neutral rate - neither speeding up nor slowing down an economy.
A repeat of the rises in either inflation and/or interest rates in 2023 is very unlikely. The range of possible outcomes have narrowed. Fundamentals are being reflected again - we are seeing individual investments behaving differently. Our strategy remains to own a properly diversified group of high-quality U.S. and Canadian companies with great leadership. These businesses are profitable, central to the economy and are ready to thrive as the next cycle of economic growth unfolds.
Your investment portfolio remains in a strong position.
The view from Brian Belski, BMO’s Chief Investment Strategist:
Stocks in your portfolio that made a new 52 week high this past month:
Bristol-Myers Squibb*, Canadian National Rail*
Stocks in your portfolio that made a new 52 week low this past month:
The Loonie retreated one cent versus the U.S. dollar to:
Thank you and all our best,
Ian, Gab, Kaitlyn, & Nataliia