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.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
