KEY TAKEAWAYS
U.S. Equities:
- Positive momentum in June after the resolution of the debt ceiling crisis.
- S&P up 12% YTD; NDX up 35%. Both surpassed technical resistance levels.
Tech Companies’ Dominance:
- A select group of tech leaders is significantly driving U.S. stock market returns. These tech leaders contributed 53% to the S&P performance.
- Rally is starting to broaden which is needed to sustain the uptrend.
Canadian Market:
- The TSX is underperforming compared to U.S. indices; up by just under 1% for the year. The lag is attributed to the performance of material, energy, and financial stocks.
Fixed Income:
- XBB – iShares Core Canadian Universe Bond Index ETF is down by 0.36% YTD.
- Bond market pressure is caused by rate hike uncertainties and inflation concerns.
Rate Hikes:
- Bank of Canada raised the lending rate to 4.75%, a 25 basis points increase.
- U.S. Federal Reserve kept rates steady, now at 5.00%.
Future Rate Projections:
- U.S. and Canadian authorities suggest readiness to raise rates to hit the 2% inflation target.
- Economic indicators like employment and GDP remain strong, signaling potential future hikes in an effort to cool the economy.
Investment Portfolio Overview:
- Significant growth in U.S. stock market indices primarily due to tech giants.
- Canadian market barely positive; fixed income largely negative. Result: modest returns for diversified portfolios.
Implementation of Strategies for Uncertain Markets:
- Emphasis on capital preservation and risk-adjusted returns.
- Approaches to achieve this:
- Favoring Canadian non-corporate bonds for stable yields.
- Using money market funds for attractive yields with low risks.
- Pivoting to funds with better risk-to-return metrics using 2022 and 2023 data.
- Utilizing correlation and standard deviation analysis to select stocks and funds that complement each other.
- Leveraging various option strategies in some portfolio models to enhance cash flow.