June 2024 - Monthly Update
Nataliia Riabenko - Jun 01, 2024
We hope this note finds you well and enjoying a great time away as the days lengthen and summer forms.
Your portfolio rose once again during the month of May. Your wealth has benefited from positive performance seven of the past eight months.
North American stock and bond indices rose over the month with the growth in the United States (U.S.) far outpacing Canada.
Three positive trends to highlight for the U.S.:
- Robust Corporate Earnings – Investor confidence rose as a broad variety of companies reported compelling financial results.
- Consumer spending and employment rates remained strong fueling optimism about the future for the economy.
- Technology Continues to Lead – Continuous innovation and optimism about technological developments was a key driver for May’s positive market growth.
For Canada, the principal topic of conversation was the increase to how capital gains are taxed stemming from April’s Federal Budget. Canada’s modest market gains over the month were a secondary affair.
While we are of the view this is broadly more impactful for real estate outside of principle residences, this is an important tax consideration for investment portfolios. We have proactively addressed this change with families where action was recommended.
Higher taxes in Canada ultimately reduces foreign investment harming its economy – the most important driver for Canadian stocks.
All-in-all this reinforces the sound strategy of investing in U.S. stocks for growth and bonds/bond-like Canadian stocks for predictable income and stability.
You and your investments are in a strong position.
The view from Brian Belski, BMO's Chief Investment Strategist:
“
The S&P 500 more than shook off its April weakness with the index gaining… during May and ending at a month-end all-time high. Last month’s rebound pushed the [year-to-date] more than double the historical average return for the first five months of the year. As a result, we were compelled to increase our 2024 year-end S&P 500 price target … since historical performance patterns suggest continued gains given this level of [year-to-date] performance. In addition, it appears that investor expectations and Fed messaging have become essentially aligned vs. the significant disconnect that existed at the beginning of the year, which we believed was one of the biggest risks to market momentum at the time. Nonetheless, we are still skeptical that the … pullback that occurred from late March through the end of April will be the worst for the S&P 500 this year. However, we are now convinced that should a more severe pullback happen, it will likely occur at higher index levels than we previously anticipated with the eventual rebound beginning at a much higher base leaving plenty of room for stocks to run through year-end…The S&P/TSX gained … in May, underperforming the S&P 500 for the first time in two months. Despite still lagging the S&P 500 year to date, we believe the TSX remains poised to reverse course and begin to overtake its neighbour to the south for the remainder of 2024. As we have discussed frequently over the last few quarters, we believe that a significant catch-up trade will eventually transpire in Canada. To be more specific, we believe the upside in Canadian equities will be driven by the strong relative value position, improving fundamental sentiment, returning foreign flows and the overall broadening of equity performance from the US megacaps. Overall, we remain steadfast in our view that Canada remains the contrarian call in terms of developed markets in 2024, even as the TSX starts to outperform. As the reality of a more resilient economy (for both Canada and the US), coupled with increasingly stable interest rates become clear in the second half of 2024, we believe fundamentals will begin to rebound faster than currently expected, helping to drive more consistent and broader performance as the year progresses.”
Stocks in your portfolio that made a new 52 week high this past month:
Microsoft*, Qualcomm*, Royal Bank *, Thompson Reuters*
Stocks in your portfolio that made a new 52 week low this past month:
Accenture*, TD Bank*, United Parcel Service*
The Loonie gained one cent versus the U.S. dollar to $0.735
We wish you and your family all our best.
Thank you,
Ian, Gab, Kaitlyn & Nataliia