Experts say now is a good time for Canadians to reevaluate their investment strategies and prepare for the evolving market conditions. (Getty Images) (SEAN GLADWELL via Getty Images)
After a dismal 2022, many Canadians ought to be relatively pleased with their investment returns last year, says Michael Currie, senior investment advisor at TD Wealth.
“There does seem to be a general vibe and feel out there that things are really, really bad, and at least in terms of the overall markets … things are actually pretty good,” Currie said in an interview with Yahoo Finance Canada.
So, what does this mean for 2024?
Experts say now is a good time for Canadians to reevaluate their investment strategies and prepare for the evolving market conditions.
Adjust to falling interest rates
Although Bank of Canada Governor Tiff Macklem has said it is too early to consider rate cuts, the central bank could begin cutting interest rates as early as April or May, Currie says, citing forecasts from TD.
He advises investors to act accordingly.
“The biggest message is you don’t invest the same when rates are falling as you do when rates are rising,” Currie said. “It’s not a real coincidence that almost every gain we’ve seen this year has come in the last two months, because that’s when the market assumed we hit the peak of rates and they’re starting to come down.
“So, falling interest rates will absolutely be the story of 2024.”
Last year, many investors chose to park money in savings or a short-term Guaranteed Investment Certificate (GIC), earning risk-free returns of 5 per cent or more. Although it was an effective strategy in a high-interest-rate environment, Currie notes that “completely opposite market forces” are starting to take shape.
“GIC rates are already falling,” he said.
As a result, Currie says Canadians looking to simply protect their cash in 2024 could be in for a “rough year,” potentially missing out on greater gains elsewhere.
‘Bonds are going to make a comeback’
As interest rates fall, bond prices tend to rise.
This is among the reasons why experts are predicting a big year for bonds. In fact, RBC Wealth Management states in its 2024 outlook that bond investing is the most attractive it’s been in 16 years, emphasizing the higher base rates.
“It’s looking like bonds are going to make a comeback and provide almost equity-like returns,” Diana Orlic, portfolio manager at Richardson Wealth, told Yahoo Finance Canada.
Although the yield curve is currently inverted, meaning short-term interest rates are higher than long-term ones, Orlic and Currie agree there could be greater upside with securing longer-term bonds before rates decline.
“If you think we’re going to be seeing 3-4 per cent rates, why not lock in 5.5 now for the next 7-10 years?” Currie said, adding that many bonds are trading at a discount.
As there’s uncertainty over how some companies will cope with the higher costs they’ve been experiencing, Orlic suggests focusing on investment-grade and government bonds.
“There’s a little more safety there,” she said.
Seek out stock market opportunities
Typically, Currie says his clients look for two things from the stock market: low risk and dividends.
“Well, they’re absolutely the two worst places you could have put your money last year,” he said, citing poor performance from the TSX’s low volatility and dividend indexes.
But this could present an opportunity for some “bottom fishing” entering 2024, provided investors aren’t already overweight in these areas.
“It should be good for some of those beat-up sectors, like real estate, utilities, the phone companies,” Currie said. “We’ve already seen that even though they’re all negative year-to-date, they were all up about 7 per cent in November.”
He describes the energy sector as a wild card.
“It’s a big, big part of the market,” Currie says, “and a lot of Canadian investor portfolios have zero there.”
Currie’s final piece of advice: “Don’t ignore the growth companies.”
Large-cap growth companies were the “big winner” of 2023, he notes, with the technology sector outperforming in both Canada and the U.S. Valuations might be “on the high side,” but Currie says there’s nothing wrong with having some exposure there to help diversify a portfolio.
Potential for volatility remains
While there are opportunities to be had, Orlic expects 2024 to be a volatile year.
Richardson Wealth is calling for a recession, citing the lingering effects of inflation and high interest rates. As such, it’s adopting a “moderately defensive” approach – at least for now.
“We love bonds, we like cash, and we worry about equities,” it wrote in its 2024 outlook.
In addition to interest rates and inflation numbers, Orlic says they’ll be monitoring the job market and the overall health of the consumer. Ongoing geopolitical risk and the U.S. presidential election could also play a big role, she notes.
“I think it’s going to be a bit of a rollercoaster,” Orlic said.
Establishing a core position in stable, dividend-paying stocks can offer a buffer, she says. Investors should also feel comfortable holding some cash, or exploring other liquid alternatives, until a clearer picture emerges, she adds.
“Sometimes, you have to take your profit, sit on the sidelines, look for what is thrown your way, and then be ready to deploy again,” Orlic said.
Most importantly, she advises clients to consider their time horizon and risk tolerance when making such decisions.
Farhan Devji is a freelance journalist and published author based in Vancouver. You can follow him on Twitter @farhandevji.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
