Morning Market Brief: December 29, 2023

Canadian equities rebound in 2023

Canada’s main index, the S&P/TSX Composite Index, posted a relatively strong return over 2023. This came after a volatile 2022 in which central banks lifted interest rates and equity markets tumbled. That story changed in 2023 when the conversation shifted to potential rate cuts from central banks. (Performance data below as of December 27, 2023).

• The S&P/TSX Composite Index returned over 8% this year. 2023’s performance was a relatively strong rebound from the nearly 9% decline in 2022. Over the past 10 years, the S&P/TSX has delivered an annualized return of just over 4%. On a total return basis, which includes dividends, the S&P/TSX has had an annualized return of almost 8%.
• The S&P/TSX saw eight of 11 sectors posting a positive return this year. Information technology, health care and industrials delivered the highest returns in 2023.
• Despite the strong performance of Canadian equities, they lagged equity markets in several other major economies, most notably the US. The S&P 500 Index posted a return of over 24% in 2023. The technology-heavy NASDAQ Composite Index rose almost 45%, highlighting the dominance of technology stocks this year.
• Canadian fixed-income markets also posted a relatively healthy return this year after a tumultuous 2022. Expectations rose for the Bank of Canada to begin cutting interest rates in 2024 and, as a result, bond yields fell while bond prices increased.

Following a tough 2022, financial market performance in 2023 reinforced the value of staying invested for the long term. Markets will aways go through cycles, often providing opportunities to take advantage of potentially mispriced securities. As we enter 2024, key themes will likely revolve around central bank actions, moderating inflation and ongoing geopolitical tensions. While volatility always lingers, financial markets could see some upside potential.

Please feel free to contact your advisor if you have any questions.