Market Update October 2023

Recent Market Moves

Following a strong start in July, the equity market encountered heightened turbulence over the subsequent three months. Bond yields surged to their highest point in 15 years, oil prices rallied to their peak since the prior November, and the U.S. dollar, often seen as a safe haven, strengthened.

Looking Ahead

Maintaining our cautious stance remains prudent, as multiple indicators signal potential fragility over the next six months. Challenges include a decrease in extra household savings, the depletion of excess household savings, the delayed repercussions of the past year’s interest rate hikes, and indications of a cooling labor market with a notable decline in job openings.

A Considered Warning

It's essential to note the risks of reacting prematurely to inflation, a lagging indicator, and the delayed impact of interest rate changes on the economy. We hope the Bank of Canada recognizes the economic slowdown and the tightening of financial conditions, evident in rising global bond yields.

Looking at the Opportunities in Fixed Income vs GICs

Despite these challenges, fixed-income yields are at their highest point in 14 years. For non-registered assets, discount bonds appear more favorable than GICs for two critical reasons. Firstly, discount bonds offer a higher after-tax return due to their tax-efficient treatment. Secondly, they are liquid and can be sold when market opportunities arise, in contrast to GICs, which are locked until maturity.

In Summary

The current market reflects heightened volatility, surging yields, and economic uncertainty. Amid these fluctuations, the importance of long-term investing cannot be overstated, along with an unwavering commitment to our core principles: preserving capital, effectively managing risk, and generating income.

These principles serve as a steady anchor in navigating the current economic landscape, ensuring our financial strategies remain resilient and adaptable.