Q4 2023 in review

Year-end rally lifts sentiment, but the outlook remains mixed.

Canada’s stock market produced a robust gain in the fourth quarter to finish 2023 with a double-digit return. Slowing inflation fueled optimism that the Bank of Canada and other major central banks could begin cutting interest rates as soon as the first half of 2024. In addition, GDP growth appeared set to remain in positive territory in the fourth quarter following a contraction in the previous three months, raising expectations that the economy would experience a “soft landing.” Notably, the market’s advance occurred without the participation of energy stocks thanks to impressive gains for gold miners and financials. The rally helped the S&P/TSX Composite Index move out of its longstanding trading range and close the year near an 18-month high.

Signs of continued economic strength, higher-than-hoped inflation, and conflict in the Middle East weighed on returns in October, spurring worries that the U.S. Federal Reserve (Fed) would raise interest rates further. However, stocks rebounded in November as consumer spending and inflation slowed, triggering hope that the Fed may have finished its interest-rate hikes. Investors were further encouraged in December when the Fed signaled that it would likely cut rates in 2024 while keeping open the possibility of further increases, if needed. Within the broad-based S&P 500 Index, the real estate, information technology, financials, industrials, and consumer discretionary sectors notched notable gains for the quarter. Conversely, the energy sector declined, as oil prices slumped.

The world equity markets performed very well in the fourth quarter, as the worries that had weighed on sentiment earlier in the year rapidly dissipated. At the same time, global growth remained in positive territory. This raised hopes that the economy could achieve a “soft landing” despite the protracted period of central bank tightening, which in turn would support corporate earnings. While nearly all major market segments and geographies finished with gains, mega-cap U.S. technology stocks continued to be an important source of leadership.

Global bond markets rallied significantly in the final quarter of 2023, pushing the broad global bond indexes into positive territory for the calendar year. After a down month in October, global fixed-income markets bounced back in November and December, posting their best two-month period of performance in more than three decades. The catalysts for the global bond rally included lower inflation in many regions of the world, as well as moderating economic data, most notably in the labor market. These developments boosted investor expectations that the world’s major central banks were done raising short-term interest rates. This view was confirmed when many of these central banks held interest rates steady during the quarter.

As a result, global bond yields declined sharply across the board, boosting bond prices. Regionally, North American bond markets fared best, while bond markets in the Asia-Pacific region lagged as the Japanese central bank further loosened its cap on the 10-year government bond yield. Sector performance was uniformly positive, with investment-grade and high-yield corporate bonds delivering the strongest returns while sovereign government bonds underperformed.

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FTSE TMX Canada Bond Universe Total Return (CAD$)






Source: Bonds, FTSE Russell; equities, TD Securities, as of December 31, 2023. It is not possible to invest directly in an index. Past performance does not guarantee future results.

The material contains information regarding the investment approach described herein and is not a complete description of the investment objectives, risks, policies, guidelines or portfolio management and research that supports this investment approach. This commentary in this report is provided for informational purposes only and is not an endorsement of any security or sector. The opinions expressed are those of Manulife Private Wealth as of the date of writing and are subject to change without notice. The information in this document including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. This material does not constitute an offer or an invitation by or on behalf of Manulife Private Wealth to any person to buy or sell any security. Past performance is no indication of future results. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable, but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Neither Manulife Private Wealth or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein. Please note that this material must not be wholly or partially reproduced.

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Manulife Private Wealth

Manulife Private Wealth

Manulife Private Wealth

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