Following a strong Q1 performance, global markets continued their upward trend in Q2 2023. The US market led the way, displaying decent performance, while Emerging markets lagged.
At a glance
- The major US indices had varying performances in USD terms: NASDAQ 100 (12.8%), S&P500 (8.3%), DOW (3.4%), and Russell 2000 (4.8%). However, factoring in the appreciation of the Canadian Dollar against the USD, returns in US dollars were somewhat subdued.
- The All Country World Index showed a modest increase of 3.1% in Canadian dollar terms. Emerging Markets and European markets were down in the quarter in Canadian dollars, falling -1.8% and -1.0%, respectively.
- Most major central banks, except the Bank of Japan, raised interest rates over the quarter. The Fed and Bank of Canada signalled potential further rate increases to combat inflation.
- Bond markets experienced volatility due to interest rate fluctuations, with the Canadian Bond Universe and the Barclays US Treasury 1-5 year index recording losses.
- The disruption in the markets in 2022, with large-cap tech stocks and the bond market experiencing substantial declines, marked the initial phase of a prolonged adjustment period for all assets to reestablish their valuation ranges under new economic regime and interest rate normalization.
- The current bull market is unlike any we have witnessed before. One would have to look back quite far in history to see a comparable concentration of returns experienced in the first half of 2023.
- A contraction in corporate capex and consumer spending is expected in the latter half of 2023. Industrial growth remains supported, but inflation and potential tightening measures pose risks.
- We have a great collection of companies in our portfolios. They are extremely well-diversified. All of our valuation metrics have never looked more promising, instilling a strong sense of confidence in our portfolios and their global exposure.
- Inflation remains stubborn, and we believe that even as it stays steady or declines into the 2.5-3.0% range, central banks will maintain a restrictive policy for longer than the market anticipates.
- We are committed to exercising patience with the outstanding companies we own and refraining from chasing short-term returns and momentum. Our goal is to achieve positive returns this year while remaining vigilant in the face of significant risks.
The views expressed in this commentary are those of Tall Oak Capital Advisors as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Statistics, factual data and other information are from sources Tall Oak believes to be reliable but their accuracy cannot be guaranteed. This commentary is intended for distribution only in those jurisdictions where Tall Oak Capital Advisors are registered. Securities-related products and services are offered through Raymond James Correspondent Services Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Gryphin Advantage Inc., which is not a member-Canadian Investor Protection Fund. This commentary may provide links to other Internet sites for the convenience of users. Tall Oak Capital Advisors is not responsible for the availability or content of these external sites, nor does Tall Oak Capital Advisors endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Tall Oak Capital Advisors adheres to.
