Quarterly Newsletter - Fall 2023

After 2 excellent quarters in a row, the strong performance that investors enjoyed in 2023 was put on hold in the third quarter as interest rates, inflation and a slowing economy hit the brakes on the market rally.

Canadian, US and global equities started strong in Q3, rising until July before ending on a down note in September. Even with the decline in October, the equity market remains in positive territory relative to the start of the year.

The momentum on the Canadian and US labour markets finally appeared to slacken in the third quarter. Canadian wage growth also slowed. The Federal Reserve and the Bank of Canada welcomed this development, signalling an interest rate pause. Does this mean an end to rate hikes? Perhaps in Canada, where GDP growth is just slightly positive. South of the border, stronger consumer spending and a weaker impact on mortgage rates (30-year fixed mortgages) could mean one or two additional increases. Federal Reserve Chairman Jerome Powell announced in September that the Fed was nearing the end of its rate hike cycle but there was still a long way to go to bring inflation sustainably down to 2%.

Stagnation

Are we about to enter a stagnation cycle characterized by weak economic growth and high inflation? Some economists think so. What we can say with certainty is that inflation will remain high for quite some time. Canada’s inflation rate ended the third quarter at 4% while US total CPI was 3.7%. These figures can be attributed to rising food and gas prices and higher rent and mortgage costs. However, the data for core inflation points to a slow but consistent disinflationary trend.

The meeting between US President Joe Biden and his Chinese counterpart Xi Jinping aimed at boosting US-China trade relations should offer investors some hope. In response to its slower-than-anticipated post-COVID economic recovery, China has introduced a series of stimulus measures targeting consumer spending and capital markets like the real estate and technology sectors.

What about the rest of the year?

What can we expect as we wrap up the year? Though we don’t know the exact timing, we’re now nearing the end of the rate hike cycle. Transition periods are often associated with volatility. No matter where you are in the market cycle, it’s important to adopt a disciplined investment approach and stay focused on your long-term goals. This means you don’t let your emotions get in the way when it comes to investing. By constantly reviewing and monitoring your portfolio, you can ensure that it stays on track.

Each Desjardins Securities advisor named on the front page of this document, or at the beginning of any subsection hereof, hereby certifies that the recommendations and opinions expressed herein accurately reflect such advisor’s personal views about the company and securities that are the subject of this publication and all other companies and securities mentioned in this publication that are covered by such advisor. Desjardins Securities may have previously published other opinions, including ones contrary to those expressed herein. Such opinions reflect the different points of view, assumptions and analysis methods of the advisors who authored them. Before making an investment decision on the basis of any recommendation made in this document, the recipient should consider whether such recommendation is appropriate, given the recipient’s particular investment needs, objectives and financial circumstances.

Author :

Martin Archambault | BBA, CIM®

Portfolio Manager, Senior Wealth Manager

514-985-4265 ext 5064265

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