Thanks to the last two months of November and December, the stock market managed to end 2023 with significant gains. And the market for marketable bonds also developed well.
Here are the various Canadian and American stock indices and the respective increases they recorded over the last 12 months:
- Toronto S&P/TSX: 8.1%
- Quebec IQ-30: 8.3%
- Quebec IQ-120: 8.5%
- New York S&P 500: 24.2%
- New York Dow Jones: 13.7%
- New York Nasdaq: 43.4%
The obligations
The bond market, i.e. the market on which tradable bonds from various levels of government (federal, state, local), state corporations and corporations are traded, also performed well in 2023. Here is the performance of some exchange-traded funds (ETFs) that closely track the performance of marketable Canadian bonds:
- XBB (Canadian Bond Universe Index): 6.45%
- XLB (long-term bonds): 9.10%
- XSB (short-term bonds): 4.67%
- XCB (corporate bonds): 8.19%
GICs
In addition to the good performance of the stock and bond market, savers in 2023 even had the opportunity to invest part of their savings in bank CPGs (guaranteed investment certificates), which offered a return of 4 to 5.5%.
With the sharp rise in interest rates following the Bank of Canada's rate hike, banks and credit unions were “forced” to show “some” generosity.
Your next statement
You will soon be able to see first-hand to what extent you have “enriched” yourself compared to 2022 when you receive your investment statement as of December 31, 2023. It doesn't matter what type of investments you hold (stocks, bonds, stock funds, bond funds or balanced funds) you should have made profits.
According to financial data collected by Aubin Actuaire Conseil as of December 31, 2023, a typical portfolio consists of 50% Canadian bonds (FTSE Canada Univers Index), 25% Canadian stocks (S&P/TSX Index) and 25% % from global stocks (MSCI World Index) reported a return of 11.4% in 2023.
For a typical portfolio consisting of 35% bonds, 32.5% Canadian stocks and 32.5% global stocks, the return reached 12.8%.
And in the case of a portfolio that is 65% bonds, 17.5% Canadian stocks and 17.5% world stocks, the return is 10%.
2023 instead of 2022
This good development of the stock market and the bond market in 2023 is therefore in stark contrast to the previous year in 2022, which turned out to be really “bad” for both the stock market and the bond market.
As for stock indices, I would like to remind you that losses in 2022 varied between 6% in the Canadian market and 19% in the American market, with a downside peak of 33% for the Nasdaq. On the tradable bond market indices side, losses were between 11 and 22%.
When your portfolio takes such a hit on the stock market and bond market as it did in 2022, it weighs on your morale. To the point where even the most optimistic investors ponder and their “mental” is breathing down their necks!
What awaits you in 2024?
In 2024 it will be the fourth year of the US presidential cycle. And historically, the American stock market tends to perform relatively well in said election year.
Let's keep our fingers crossed that this historic upward trend continues in 2024. Given the great influence that the American stock market has on all stock markets, we can only benefit from it, especially here in Canada.
That means there is still a long way to go. Given the high level of the stock market indices, corrections are to be expected over the course of the year.