December 2023 Market Update

Good Afternoon,

Much to the delight of investors, equity and bond markets built upon the recent rally in December and finished the year off strong. But before we dive into the December update, I wanted to provide the friendly reminder that your 2024 TFSA contribution limit is $7,000; this brings the current lifetime limit to $95,000.

December Market Performance:

• Bonds:
  • VAB – Canadian Aggregate Bond Index ETF: 3.4%
  • VBU – US Aggregate Bond Index ETF: 3.1%
  • VBG – Global ex-US Aggregate Bond Index ETF: 2.8%
• Equity:
  • S&P500: 3.7%
  • DOW: 3.6%
  • TSX: 2.8%
  • FTSE100: 2.6%
  • NASDAQ: 5.3%

The Bank of Canada kept its policy interest rate at 5% in December. This was the third consecutive meeting with no rate hike. The Federal Reserve in the US also kept its policy rate steady for the third time in a row at 5.5%.

On the inflation front, the US reported reading came in at 3.1%, which was a notch lower than the expected 3.2%. In Canada, the recent reading was in line with expectations at 3.1%.

The above information coupled with moderating economic growth and low US unemployment bolstered the market’s conviction that the Fed in the US can potentially pull off a soft landing; this is a scenario where inflation drops, the economy slows, but a recession is not triggered. This helped boost the markets in December.

The other piece that helped boost the markets at the end of the year was the indication by the Fed that there may be a total of 0.75% in rate cuts in 2024. This was more than the market initially expected and investors reacted positively to this news.

With the new year upon us, I wanted to provide a few Financial Planning New Year’s Resolutions.

5 Financial Planning New Year’s Resolutions:

1. Create a monthly budget.
   1. Tracking your spending and creating a monthly budget can seem daunting. But if you take the upfront time to map out where you want your money to go, meeting your financial goals will be much easier.
2. Pay down your credit cards.
   1. Credit card interest rates in Canada typically range between 20% and 26%. With the holidays just ending, many people have more on their cards than usual. If you focus on paying this down and then consistently paying them off through the year, you will save yourself a ton in interest.
3. Build an emergency fund.
   1. The rule of thumb is to have 3-6 months of living expenses in your emergency account. I recommend keeping this in a separate high interest savings account at your bank; this will enable you to access the money quickly. Having an emergency fund provides peace of mind, but also allows you to leave your other assets untouched and let them grow over time.
4. Automate your savings.
   1. Once your monthly budget is in place, you will have a clearer idea as to how much you can save each month for retirement or any other financial goal. An easy way to stay on track is to setup auto-deposits to your investment accounts each month. That way it’s built into your monthly spending and if the money is not sitting in your checking account, it lowers the temptation to spend it elsewhere.
5. Write a will / update your current will.
   1. Less than half of all Canadians have a will in place. Having a legal will is an important piece of financial and estate planning. It enables you to dictate where your assets are to go should you pass and allows you to provide for your loved ones. If you already have a will but haven’t looked at it for a few years, it might be time for a refresh; our lives are always changing and what you put in your will 5 years ago, may no longer be relevant.

If you have any questions on the above or your portfolios don’t hesitate to reach out.

Thanks,