Some of the stocks that struggled in 2022 are becoming darlings in 2023. These were mainly tech stocks that bottomed at the end of last year. With the potential of AI (Artificial Intelligence) changing the way we do business and live our personal lives going forward, these tech companies, especially large tech, have rallied on the potential of additional revenue sources.
Global stock indexes which hold mostly cyclical and financial stocks like the TSX (Toronto Stock Exchange) have traded mostly sideways with a positive bias. The large indexes in the US, namely the NASDAQ and S&P 500, have performed much better so far YTD (year to date).
This US rally has been quite concentrated in large, capitalized stocks within these indexes. As interest rates peak and eventually trend lower, I expect the stock market strength to broaden out. This means many more stocks will show positive rates of returns.
As central banks globally get a handle on inflation and achieve their 2% target, interest rates should decline to help maintain economic growth. Declining interest rates are typically good for bonds and dividend paying stocks. If the global economy remains stable over the next six to twelve months, we should see commodity prices improve, thereby supporting cyclical stocks. Anticipated lower interest rates should then support financial stocks.
In summary, I expect the global stock market to continue to rally over the next six to twelve months. We may have some short-term weakness, but as we go towards year end the rally should broaden out where we see the TSX perform better than it has so far YTD. Over the past year, higher interest rates have now allowed bonds to provide decent returns, so a balanced portfolio of stocks and bonds has the potential to provide good rates of return over the next year or two.
If you have any questions or concerns, please feel free to contact me.
Best regards,
Bill Achtymichuk, CIM®, FCSI®, CFP®
Portfolio Manager / Senior Wealth Advisor
iA Private Wealth | Active Wealth Partners
Insurance Advisor| iA Private Wealth Insurance*
5470 Calgary Trail NW, Suite 202
Edmonton AB, T6H 4J8
T: 780-944-2690
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