To help you better understand the funds in which you’ve invested, Bâtirente’s Investment Strategy Manager, Jean-François Dumais,* offers his analysis here of the economic conditions for the first quarter of 2023.
Central bank interest rate hikes had an impact on worldwide inflation, which has been decreasing rapidly. For example, in Canada, this rate has been on the decline, dropping from its peak of 8.1% in June 2022 to 5.2% by March 31st. It seems that this monetary tightening is coming to an end. The Bank of Canada put the rate hike on hold as of January.
The recent bankruptcy of Silicon Valley Bank, difficulties experienced by a number of regional American banks and rescue of Credit Suisse by UBS (two major Swiss banks) resulted in market volatility in March and are a good argument for ending monetary tightening policies.
The more difficult monetary conditions will likely unleash a recession in the second half of 2023, but this should be limited on either side of the border primarily due to the labour shortage.
Expectations of the impending end to this money tightening and a moderate recession have brought a positive outlook regarding bond and equity markets.
Bond and equity markets ended the first quarter of the year on a positive note.
The FTSE Canada Universe Bond Index had a 3.1% return. As for equity markets, the Canadian Equity Index posted a performance of 4.6%, while all-country equities yielded a return of 7.2%. Meanwhile, the Global Small Cap Equity market ended the quarter with a 4.2% result (all data in Canadian dollars).
Sectors performed quite differently compared to last year at this time. In fact, the technology sector is now one of the leaders of the pack despite lagging far behind in 2022. Conversely, the energy sector delivered the weakest results even though it was at the top of the heap last year.
For Bâtirente, now more than ever, diversification is important for generating strong long-term returns in constantly evolving markets.
*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 nearly 20 years’ experience in financial markets.