April 22, 2024 | portfolio managers' brief

Portfolio Managers’ Brief: April 2024

BY: Jason Ayres
A brief review of market conditions and how they are impacting the management decisions of our Investment Review Committee (IRC).


Key Takeaways

U.S. Market Performance

  • Strong Economy: The U.S. economy showcased strength at the end of the first quarter, primarily driven by robust consumer spending and a stable job market.
  • Market Gains: The S&P 500, Nasdaq, and Dow Jones all recorded gains, with the S&P 500 rising by 10.50%, Nasdaq by 9.00%, and Dow Jones by 6.00%, although they experienced some pullback as of the recording time.

Canadian Economic Challenges

  • Impact of High Interest Rates: Implemented high interest rates have dampened consumer and business spending in Canada, affecting growth especially in housing and durable goods.
  • Stock Market Performance: Despite slow growth, the S&P TSX hit a record high, rising by 6.00% before seeing a decline in the first half of April. Health Care and Energy sectors led, while Communication Services and Utilities lagged.

Global Perspectives

  • European Challenges: Germany faces a recession, but the European Central Bank held interest rates steady, with possible future cuts.
  • Global Market Performance: The MSCI All Country World Index ended the first quarter up by 8.00% but showed signs of pulling back in April.

Canadian Fixed Income

  • Bond Market Trends: The bond market saw prices drift lower amid high interest rates with the Ishares Core Canadian Universe Bond Index ETF closing Q1 down by 1.24% and down 3.00% year to date.

Canadian Inflation and Monetary Policy

  • Inflation Rates: March 2024 saw a CPI increase to 2.9%, indicating ongoing inflation struggles, supporting the Bank of Canada’s cautious stance on rate cuts.
  • Bond Market Outlook: High interest rates mean low bond prices, but bondholders benefit from reasonable interest rates.

U.S. Inflation and Interest Rates

  • Inflation Dynamics: The U.S. CPI rose to 3.5% year-over-year in March 2024, reflecting persistent but stabilizing inflation, with the Federal Reserve adjusting its rate hike strategy based on economic conditions.

U.S. Elections and Market Implications

  • Election Uncertainty: The upcoming U.S. elections may increase market volatility as investors assess potential economic impacts from policy changes.

Bull and Bear Cases for Election Outcomes

  • Trump’s Impact: A potential re-election of President Trump might boost markets due to favorable economic policies, though his international trade and geopolitical strategies could cause market pressure.
  • Biden’s Impact: President Biden’s continuation in office would likely support global trade stability but might impose stricter regulations and higher taxes, especially affecting pharmaceuticals and technology sectors.

Market Opportunities

  • Navigating Challenges and Opportunities: The first quarter of 2024 highlights a mix of potential challenges and opportunities, with expected market pull backs offering investment opportunities.

Investment Strategy

  • Strategic Focus: Our investment strategy remains cautiously optimistic, focusing on companies with strong fundamentals and resilient business models. The strategy includes employing various option strategies to enhance cash flow while allowing participation in potential gains in many of our portfolio models.

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PART 1: PORTFOLIO MANAGERS’ BRIEF Conversation With Founder & CIO Richard Croft – October 2023

In part one of our conversation, Founder and CIO RIchard Croft touches on the anticipated direction of interest rates and how Canadian banks have been impacted by the current economic environment and what to expect going forward. He also comments on inflation expectations and just how we are managing risk in client portfolios.