- 2023 saw double digit returns in the S&P 500
- The magnificent seven on the S&P 500 carried between 80- 85% percent of the returns and concentration levels and make up over 35% of the weight of the S&P 500
- Historically markets are positive throughout an election cycle in the fourth year, so that is more bullish
- Bonds or equity sides look good in 2024
As we enter into a new year and welcome 2024, it’s a great time to review 2023 and get some informed insight on the year ahead.
Joining the Market Herald Canada to discuss the bear and bull market analysis is Richard Carleton, CEO of the Canadian Securities Exchange and Brianne Gardner, wealth manager and financial advisor with Velocity Investment Partners at Raymond James.
TMH: Richard, what are your thoughts on 2023, was it a bear or bull market?
Carleton: For the junior resource sector, it was a big fat grizzly. For other parts of the market, maybe not so much. But I don’t think you can actually apply bull or bear to the entire market and have it really ring true because, as I say, there are parts which are doing really well and there are other parts which have had a number of challenges over the course of the year.
Gardner: I would agree with Richard there on the big picture. A lot of people would probably classify this year as a bull market because we’ve seen double digits return in the S&P 500.
However, you know, even going back to the beginning of this, what has been carrying the market is really the Magnificent Seven (tech giants Microsoft, Alphabet, Amazon, Apple, Meta, Tesla and Nvidia). They’re carrying, I believe it’s around 80 percent, maybe 85 percent of the returns and concentration levels; they’ve been the most concentrated they’ve been in a very, very long time. They make up over 35 percent of the weight of the S&P 500. So again, the other 493 companies are not helping to carry and are not participating on the upside this year.
So for us, I don’t know if you can really classify that as, as much of a bull market looking at the equal weight S&P 500 and TSX in comparison. But again, we did not see a bear market this year. We do expect to see kind of the sustained upward trend and again, pullbacks and bounces throughout the year.
We did experience our normal, on average, we see historically to double to single digit returns and one double digit, which we did experience this year. So again, volatility is part of investing, which is why I kind of say, I would lean more to the bullish side we saw. But I wouldn’t know if I would be able to classify it as a bull or bear market this year.
TMH: All right. And what do you think 2024 may start to appear? What do you think you see for 2024 in terms of the, the bear or the bull?
Carleton: Well, again, if I’m right on my interest rate call, then, as I say, I think that we can put that fat grizzly back into hibernation for a while. And it will, as I say, it’d be interesting to see if the long term fundamentals of the underlying commodities that is the focus of most of the exploration activity at this point begins to play out in terms of better asset evaluation and easier opportunities for these companies to raise money from investors to advance these projects even further.
But again, it’s been a very tough year in that space. And something that we certainly hope to see change in 2024.
Gardner: I think we’re going to see some domination again, similar to what Richard said, interest rates, the speed and the timing of these cuts are going to be important, right?
How fast they’re going to cut to help stimulate the economy if things do start getting worse then people expect it, depending on if we see this soft landing or not, from a recessionary standpoint. I also think geopolitical factors will continue (and) are still relevant, but you know, political events, as we talked about earlier – U.S. presidential election cycle. Historically markets continue and are positive throughout an election cycle in the fourth year, so that is more bullish.
I think we’re still going to have some concerns about the Middle East and Eastern Europe, and really U.S.-China relations could have significant economic implications as well. So (these are) some things that we’re watching.
I also think economic growth, right? So if things are expected to slow, drain savings, narrowing fiscal support, and refinancing needs, and I think our thoughts right now are just shifting a little bit more defensively, so looking more at fixed income over equity side.
So I think you’re not going to be seeing those GIC (guaranteed investment certificates) rates anymore over that 5 percent (level) as interest rates come down. So anyone who’s sitting on cash on the sidelines or was really excited about those GICs, I think you’re going to have to start shifting that money into bonds or equity sides.
So I think that’s where you’re really going to get the returns for 2024.
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