Good news ! Expect your investments to generate an attractive return in the first half of the year just ended.
One thing is for sure: it will be in stark contrast to the first half of last year, which was historically one of the worst.
Whether you own a portfolio of stocks, bonds, or mutual funds, your investment statement dated June 30, 2023 can only show an increase in the market value of your investments.
In the right direction…
The reason is quite simple: All major stock and bond indices are pointing into positive territory.
Here is the total return (in Canadian dollars) of the major stock market indices for the six months ended last Friday, June 30, according to the Financial Index Returns Compilation prepared by Aubin Actuaire Conseil.
- Toronto S&P/TSX: 5.7%
- New York S&P 500: 14.3%
- MSCI World: 12.4%
- MSCI Europe: 10.9%
- MSCI Pacific: 5.8%
- MSCI Emerging Markets: 2.4%
In addition, there are the three FTSE Canada indices of the Canadian bond market:
- 91-day Treasury Bill: 2.1%
- Universe Bonds: 2.5%
- Long-term bonds: 5.4%
To give you a clearer idea of the six month return you can expect, here is a typical portfolio diversified across the three popular indices traded on the Toronto Stock Exchange, the Toronto S&P/TSX (under the symbol XIC ). , the MSCI World (symbol XWD) and the FTSE Canada Bond universe (symbol XBB), corresponding to the distribution of each of the indices mentioned.
- Portfolio with 60% bonds (XBB),
20% Canadian equities (XIC),
20% Global Equity (XWD):
5.1% yield
- Portfolio with 50% bonds (XBB),
25% Canadian equities (XIC),
25% Global Equity (XWD):
Yield 5.8%
- Portfolio with 35% bonds (XBB),
32.5% Canadian equities (XIC),
32.5% global equities (XWD):
6.8% yield
You will have noticed that the higher the portfolio’s overweight in equities, the higher the return due to the higher returns of equities compared to bonds.
Last year
As I mentioned at the beginning of the column, last year’s first semester was disastrous at this point.
While the Canadian stock market was down 9.9%, the US stock market was down 20% and the other major stock markets were down 15-17%.
The same failure exists in bonds traded on the bond market. Canadian bonds had lost 12-22% in the first 6 months of 2022.
Patience pays off
Good for investors who didn’t panic in the dreadful first half of 2022.
Today, 12 months later, they have certainly recouped all the stock market losses they had accumulated on paper, or at least almost.
On the bond market side, however, this is unfortunately not the case. 10 to 15 percentage points of the losses still have to be compensated.
Be patient with your pain!
