The 2023 investment year in review on the Sunday Reads.

Let’s just call 2023 the year most everyone got most everything wrong. Inflation is now under control and the higher rate environment did not cause a recession. We can thank banked pandemic savings, plus strong employment and wage gains for the resilient economy. Economists called for a recession in 2023. Market experts predicted negative to flat returns for stocks in 2023. We can largely thank the Magnificent 7 (growth stocks) in the U.S. for the very robust returns in 2023. That said, even when we strip out the Apple’s and Nividia’s the rest of the market did deliver positive gains. Canadian and international markets also delivered positive returns for the year. Let’s dig a little deeper into the 2023 investment year in review. Plus, the Sunday Reads.

U.S. ruled, again …

Here’s the U.S. stock returns by year and decade courtesy of Charlie.

The returns are not adjusted for inflation. Given that, the real inflation-adjusted return in the 1970s would be negative. On the flipside, the numbers for the 30s would be better due to the deflation of the period. Here’s some help on that front.

In that table we also see the lost decade for U.S. stocks from the year 2000. That’s a clear demonstration on why we de-risk well before our retirement start date. We enter the retirement risk zone several years in advance of that wonderful day when we start our fruitful retirement.

Readers will know that I’m happy to see the impending approval of spot bitcoin ETFs in the U.S. That event helped to propel bitcoin to the top of the asset return pile in 2023. I hold a modest 1% position in my RRSP. I have moved to building in my TFSA and will continue to keep that in the 15% range.

In 2023 Canadian stocks delivered 11.5%, while developed market international stocks offered up 14.6% in Canadian dollars. The Canadian bond market also delivered over 6.5% in 2023. Cash also delivered returns in the area of 5% if you were able to seek out some solid offers.

Many were able to lock in some very good GIC rates. I did suggest several weeks in advance that the GIC rates were about to be cut. I’ve since been updating that EQ Bank post every week with the declining rates for GICs. Of course, those falling rates are good for the bond market. One can hedge falling rates with bonds.

For yield one can also look to the generous dividend payers that you’d find in the Beat The TSX Portfolio or the Canadian Wide Moat stocks. Keep in mind that in the end, it is the total return that matters most.

It will be a positive year, but a year of underperformance for the Beat The TSX Portfolio.

A look at U.S. assets in 2023

Bitcoin $BTC: +152% Nasdaq 100 $QQQ: +55% S&P 500 +26% Developed ex-US +18% Small Caps: +17% Gold : +13% REITs : +12% Emerging Markets: +12% US Bonds: +6% Cash: +5% Commodities: -6%

Canadian oil and gas stocks were up 3.2% in 2023. Here’s building the Canadian energy portfolio.

For a look at a typical global portfolio returns in Canadian dollars, check out the all-in-one asset allocation ETF page. The returns are updated to the end of November. You can add over 2% to the 2023 returns thanks to very good December returns.

Here’s a taste of 2023 returns, excluding December …

I will update those tables early in the new year.

Of course, you can also build your own ETF Portfolio.

You can buy ETFs for free at Questrade.

Will stock market momentum bring more gains in 2024?

Who knows, but strong stock performance usually begets more strong stock performance as I pointed out repeatedly in 2023. https://t.co/K7fwCk5VIr

— CutTheCrapInvesting (@67Dodge) December 29, 2023

More gains would be nice. But investing is like a box of chocolates in the short term – we don’t know what we will get. We’ll get chocolates some woud cheekily suggest.

Also, Data from LPL Research going back to 1950 showed that years following a gain of 20% or more have seen the S&P 500 rise an average of 10%. That compares to an average 9.3% annual return. Such years are also more frequently positive, with the market ending the year up 80% of the time, versus 73% overall.

As the above paragraph suggests, there’s a higher probability of greater gains. But there’s no guarantee.

Key posts of the year

2023 – a year when (once again) bears sound smart while bulls make money.

In one of the first posts of 2023 I had suggested that …

The pending recession might turn out to be the most advertised and expected recession in history. It might be so expected that it doesn’t happen … We appear to be in a Goldilocks scenario with falling inflation and a consumer that refuses to cooperate with the recession narrative.

Also in January, the Bank of Canada hit the rate hike pause button as the economic forces of the rate hikes continued to move in slow motion.

2023 also brought the FHSA – First Home Savings Account.

The U.S. regional banks were supposed to break, but they didn’t.

The first quarter was very strong for U.S. stocks. Up 7%. As per this post from early April, that usually brings a strong year. It did.

It was big tech earnings to the rescue, a theme that played out through the year.

In early June I suggested that the recession can wait.

We then moved into an official new bull market.

And when you’re in retirement or near retirement and stocks are flying, you sell some shares to create to retirement income. It’s called rebalancing. It is not difficult to manage a retirement portfolio.

Another important theme – Canada is slipping. We have certainly seen the continued and exaggerated divergence between the U.S. and Canadian economies. Canada is in a recession when we consider economic growth and population, we have real GDP decline.

And I think this was a very important post and universal message in 2023 – The waiting is the hardest part. Markets can go nowhere for years. We have to stick to our investment plan and set the stage for the next burst in the stock markets, that historically has always arrived. Are we in another lasting burst right now? Could be, or we’ll be back to more waiting.

In November, stocks had their best week of the year and then kept partying into the year end.

Once again, 2023 fooled most everyone. It showed that guesswork don’t work. In that post I offered …

I enjoy watching the economic numbers and I’ll listen to a select few economists. It’s more than interesting. And I think there is value in putting the risks on the table in this blog. Awareness is preparedness. The number 1 mistake of investors is taking on too much risk and not being prepared for recessions and severe stock market corrections.

We do not change our strategy based on the massive economic and financial guesswork industry. At the core is long term optimism.

The phrase I have repeated more than any other on this blog is – get an investment plan and stick to it like glue.

Investing ain’t rocket surgery.

More Sunday Reads

At My Own Advisor Mark rings in his year in review. You’ll find an outline of Mark’s portfolio for 2023 plus some key posts of the year.

At the Findependence Hub, we have the timeless lessons from 2023.

We always check in with Dividend Hawk. Here, Hawk flies the coop on 2023 with a weekly wrap with the investment stories and posts of the week.

Banker on Wheels was a regular stop in 2023 as well. Thanks for the great posts and resources.

Cut The Crap Investing Readers love their Canadian stocks, and stocktrades.ca likely offers the most popular post links from the Sunday Reads. Here’s 10 Canadian dividend stocks to consider.

FiPhysician says make the next decade the best decade of your life. That’s our goal. But I think it would be tough to beat the years when the kids were young and we were tearing around to sports games and road trips on a regular basis. So much fun, so expensive, ha 🙂

And season’s greetings from Bob at Tawcan.

Thanks for reading and your support in 2023. Please help your Canadian friends and family and share the Cut The Crap Investing posts. Too many Canadians are trapped in poor performing high-fee mutual funds. I’m happy to help.

Also thanks to our U.S. and International readers as well. More to come for you in 2024.

Happy New Year. I wish you all the best in health and wealth and happiness in 2024 and beyond.

Help yourself – cut the crap investing

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I have partnerships with several of the leading Canadian Robo Advisors such as Justwealth, BMO Smartfolio, Nest Wealth and Questwealth from Questrade.

Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and l0w-fee ETF portfolios all at one shop.

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CASHFLOWS & PORTFOLIOS

The self-directed investor might consider the service provided by Mark Seed from My Own Advisor. He runs Cashflows & Portfolios where they will provide options for that optimal retirement funding strategy. That service is provided for a very reasonable fee.

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OUR SAVINGS ACCOUNTS

Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 2.5% and 3.5%. You’ll find some higher rates on GICs, recently updated and increased to 3-5%. They also offer U.S. dollar accounts. We use EQ Bank, they have been awesome.

OUR CASHBACK CREDIT CARD

We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …

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For November we received $50 in cash.

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