Dear valued client,
Believe it or not, we are halfway through 2023. Here is how markets have performed so far this year:
Dow Jones (index of 30 prominent U.S. companies): +4%
S&P 500 (index of 500 of the largest companies in the U.S.): +16%
NASDAQ (index of over 3000 U.S. companies with a focus on the technology sector): +33%
TSX (index of roughly 1500 Canadian companies): +4%
After the down year of 2022, these figures bring a certain relief given the fact we are in an environment of higher interest rates and tighter monetary policy. The good news is that by all measures, these policies are having their intended outcome – inflation has been dropping precipitously in North America since the beginning of the calendar year. Central banks have been able to accomplish this without tipping economies into a recession.
From a macro perspective, the market has priced in another 1-2 interest rate hikes before the end of 2023 in order to prevent an inflation rebound (which would be disastrous). 2024 will likely be a year of interest rate cuts, barring major unpredictable events. An end to the conflict in Ukraine would also be a boon for long-term, bullish investors.
In international news, cities across France have been ravaged by riots for more than a week after police killed a 17-year-old citizen of Algerian descent. A video of the incident emerged on social media that demonstrators claim is evidence of racism against immigrant communities within the country. However, many Frenchmen have pointed out that the young man in question had been in trouble with the law before (drug dealing, driving with fake license plates, resisting arrest) and had continued to put himself in confrontational situations with law enforcement.
The officer responsible for the killing has been detained and placed under formal investigation for charges of voluntary homicide. In terms of the riots themselves, thousands of people took to the streets in more than a dozen cities setting fire to cars and buildings, looting en masse, and attacking police officers. More than 500 police officers and firefighters have been injured, and many hospitalized. A Parisian mayor and his family had fireworks shot into their home in what they called an assassination attempt.
French authorities will have to figure out the best way forward. While political demonstrations are part of citizens’ sovereign rights, they should remain nonviolent. As soon as protests cross the line into the domain of bodily violence or destruction of property, the snowball of havoc and chaos grows exponentially.
“Violence begets violence, hate begets hate. It is all a descending spiral, and the end is destruction – for everybody. Along the way of life, someone must have enough sense and morality to cuff off the chain of hate.” – Martin Luther King, Jr.
Have a terrific weekend,
PW
