Predictions Are Hard to Predict

Happy 2024!

As always, we hope you have great health and happiness in the coming year. As we enter the New Year, I hope you are pleasantly surprised by the nice performance we had amongst the volatile months 2023 had presented us, though it was basically a recovery year for many indexes from their poor 2022 performance. You may have read about some of the large gains had in 2023, like the Nasdaq climbing 43.4%, yet in 2022 it lost 33% so it would need to climb 49% to just recover the 2022 years loss. I chuckle at how they window-dress this and just hope everyone forgot how bad 2022 was.

Since we did not see those large declines in 2022 in our discretionary models, our positive 2023 performance helped our portfolios gain value, rather than just try to recover, depending on your portfolio model. Many indexes are still not back to their all-time highs reached in late 2021/early 2022. For example, the Nasdaq reached 16,057 in November 2021 and today (January 07) it sits at 14,524. The Canadian TSX hit 22,213 in April 2022 and today sits at just 20,937. One would be very disappointed if they owned these over the last few years.

If you are looking for a prediction on markets for 2024, I will say they will go up, down, and sideways. Yogi Berra once said, " Predictions are hard to make, especially about the future". I couldn't agree more and to me, it is a fool’s game to play, but usually gets the talking heads some free airtime. Yes, Yogi, predictions are hard to predict.

That said, since I put the email out in October saying the market had likely bottomed, we had a relatively straight run-up for the next nine weeks! The markets entered 2024 overbought and do need to correct and consolidate before another positive move up. This week and next could see some volatility on these conditions and a possible government shutdown in the USA, if that is the catalyst to correct and then rebound, I’ll take it.

I heard all through 2022-23 that we had a massive recession facing us, war with China and Taiwan, government defaults (basically every year that is predicted). One should look at the facts and determine where to go from there at that distinct time, when things change, we will change with them.

We are entering a very interesting year with many different elections around the globe. Obviously, the biggest being November 05 with the US presidential election- expect more craziness ahead. The Taiwan election on January 13 should keep the stories of political unrest and geopolitical tensions up front and center. That said, election years can be very good or bad for individual companies as promises need to be made on infrastructure and lower taxes, and threats of reduced health care costs and taxing the rich and big corporations become the headlines closer to election dates. Typically, you will see volatility leading up to an election and then a rally, almost regardless of the outcome, once certainty is back. Usually, the first quarter is also volatile, and I expect more of the same as we are still posturing with higher inflation and interest rates.

This last week saw a pullback for the first time in 9 weeks as many took profits in a new tax year and the strong US jobs numbers indicated there is still no imminent recession and interest rates may stay higher for longer: S&P 500 closes slightly higher Friday, but major averages end 9-week win streak: Live updates | CNBC.com

You all know I have been pounding the table on this for a year or longer. You don't get recessions with historically low unemployment! You will see people spend less on discretionary items as housing and food costs squeeze into that pool of money. There are still forecasts of the Fed reducing interest rates as early as March, I don’t see it, but sure would welcome any interest rate drops...the sooner the better, as that should boost many positions we own in reits, utilities, and tech. If done effectively, and inflation can be kept at bay, and we can get global growth back then energy, tech, and commodities should do well, but that likely isn't going to happen soon, especially here in Canada. Maybe 2025? See my note on predictions above, lol.

The chance of an interest rate cut in Canada sooner than the USA is much higher. We just had a dismal job report for December with only 100 jobs created when 15,000 were predicted: Canada job gains miss forecast, jobless rate steady at 5.8% | BNN Bloomberg

One can surmise that the present government has shut the door to any idea of growth in energy, forestry, and somewhat fishing, amongst anything else that consumes more energy other than a private jet ride to Jamaica for Christmas. Do what I say, not what I do....it makes me disgustingly mad. At least some military folks got to enjoy some sun: Prime minister's plane breaks down in Jamaica during family holiday | CBC

How do we grow GDP if the industries we thrive on are being shunned? Interest rate cuts are likely imminent here sooner to ease the financial burden it has placed on mortgagees, renters, lenders (more defaults), and debt issuers…. the federal government being the leader. Our ever-expanding debt load continues to cost more to service with these higher rates, there has to be some pressure from that side to bring them down sooner, also.

2024 Things to Know:

1) TFSA limits are now at $7,000 for 2024. You can now have a total of $95,000 invested if you were 18 the year they came out (2009). Once we know your TFSA room we will track it for you, if exclusive to us.

2) RRSP contribution room for last year, 2023 is $30,780 and for 2024 is $31,560. The last day for a 2023 contribution is February 29. It's a leap year!

3) OAS clawback starts at $90,997 on 2024 income. This is why income splitting and tax-efficient strategies are so important and need to be part of one’s retirement planning.

4) There is an increase in both the basic personal amount and age 65 amount that you can deduct from your taxes. It is $15,705 for the BPA and $8,790 for those age 65 and older. There are some caveats to those amounts on income earned that your accountant can advise on.

A more comprehensive list can be found here: Essential tax numbers: Updated for 2024 | Advisor.ca

We are very busy working on all the 2024 RRIF/LIF payments this week to make sure they are correct. If you have a question on yours, please let us know. We are also working on TFSA contributions, if you want us to top yours up from your accounts or take from your chequing account please give us a call to do so.

Last, if you would like to view your quarter-end portfolio, please reach out to Amanda or Carly and we will get that to you.

Cheers,

Steve