Bâtirente’s Investment Strategy Manager, Jean-François Dumais*, provides these economic highlights for 2023.
Economy
Inflation
Central bank interest rate hikes had an impact on global inflation growth, which closed the year at around 3%—far below the 8.1% peak reached in the summer of 2022.
Key interest rates
These central bank interest rate hikes have ended, and market players anticipate several rate cuts in 2024. However, it’s hard to know when these will take place, since inflation still hovers above the 2% target of North American central banks. The goal is to avoid having inflation rise again in the event of rapid, large-scale cuts.
Recession
Rates that remain high for an extended period could bring on a recession. We’re already seeing a slowdown in economic growth across the country. Canada is likely headed for a recession, but one that will probably be milder given the positive job market. Year-on-year growth in gross domestic product (GDP) was 0.9%, compared with 4.6% in the summer of 2022.
Markets
Positivity
Anticipation of a rate cut by central banks in 2024 led to positivity in financial markets. The all-country equity index recorded a return of 18.9% (in Canadian dollars); the global small cap equity index posted a performance of 12.6% (in Canadian dollars); and Canada’s main index (S&P/TSX) achieved returns of 11.8%. The FTSE Canadian Universe Bond Index had a 6.6% return.
Bâtirente Funds’ performance
Bâtirente Diversified Funds: between 8.1% and 11.2% (from least risky to most risky)
Treasury Multi: 5.9%
Bond Multi: 8.0%
Global Equity Multi: 12.1%
Canadian Equity Multi: 12.4%
Global Small Cap Equity Multi: 13.7%
2024 outlook
Balance
Central banks’ robust strategies in 2022 and 2023 were successful and helped restore investor confidence. For 2024, the right balance will need to be found between economic growth and inflation.
Cutting rates too quickly could kick-start inflation again, while cuts made too slowly could create a major recession.
To learn more about Bâtirente Funds and get updated performance information, see the Bâtirente Funds of our website.
*Jean-François Dumais has worked as an Investment Strategy Manager at Bâtirente since 2019. Along with a Master of Business Administration (MBA) degree (Finance specialization), he has 20 years’ experience in financial markets.