2023 Mid-Year Update

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Greetings to subscribers, both new and seasoned. Here are some comments on the first six months of 2023. But first, here is a quote from my January 2023 newsletter:

"Led by tech, almost all stock sectors were lower in 2022. The relative absence of tech stocks and a heavy energy weighting resulted in a much less painful year for Canadian stock indexes versus US stock indexes."

The first half of 2023 represented a complete reversal of last year's stock market performance. Tech led US stocks significantly higher although the Nasdaq and S&P 500 are still below their 2021 all time highs. The improvement in the Canadian dollar did not help US stock returns from a Canadian point of view.

Overall, Canadian stocks were up a few percent. But dividend stocks were slightly negative on a price basis and up only around 2% including dividends.

  1st Half 2023*
Major Indexes  
S&P500 16.38%
Nasdaq 32.74%
S&P/TSX Composite 3.66%
Selected ETFs  
VFV (S&P500 in CAD terms) 12.66%
VDY (Canada Dividend Stocks) -0.20%
VGG  (US Dividend Stocks) 3.76%
VAB (Bonds) 0.45%
VSB (Short Term Bonds) -0.58%
Balanced ETFs  
VEQT (100% stocks) 8.60%
VGRO (80% stocks) 6.77%
VBAL (60% stocks) 5.49%
VCNS (40% stocks) 4.06%
VCIP (20% stocks) 2.23%
* Price change - does not include dividends/interest

Driven by higher interest rates and inflation, 2022 was an exceptionally bad year for bonds with average losses of 12%. This year to date, bonds have stabilized with price returns close to flat but, thanks to higher rates, bonds are producing interest income in the area of 4% to 5% plus.

After very poor 2022 returns in balanced ETFs (down 11-12%), we have seen decent results so far this year.
Looking Ahead
What recession??? A year ago, many forecasters were convinced we would be in recession by early 2023. Of course a recession will come but no one knows whether it is 6 months or 6 years away.

As you know, I believe in: (i) long term ownership of great businesses by holding stocks directly or through low cost index ETFs and (ii) maintaining an asset mix that matches your risk tolerance, time frame, objectives, etc. (see Chapter 9 for a refresher on asset mix). This simple, perhaps boring, but very powerful investment philosophy does not change with market ups and downs.
It is more important than ever to "Beat the Bank"!

As I said in the book, most advisors are good people. It is just that way too many of them are only able to sell crappy, expensive, underperforming products. Look no further than this recent excellent Globe and Mail article entitled: Pervasive sales culture at Canadian banks designed to push customers into high-fee products. For those of you who can't assess the link, here are some highlights:
"Canada's investor protection framework has long had a reputation for being weak and not particularly well-enforced. Investors are still often paying excessively high fees and hidden charges on investment funds. Advisers are often under no legal obligation to act in their clients' best interest."

"The system always incentivizes the sale of funds with higher fees."
"At the bank branch level, you're generally not getting investment or financial planning advice. You're getting a sales pitch masquerading as financial advice." (Jason Heath)

"All five of Canada's largest banks settled with regulators after it was found they had overcharged customers for investments – "excess fees" that amounted to tens of millions of dollars."

"Most people just assume their adviser must act in their best interest" (There is no such obligation). "The Canadian fund industry has consistently fought against the concept."

Investor advocates, including my colleagues at FAIR Canada, continue to fight for the rights of average investors.

Thank You

A special thanks to all of you who recommend my book to others. Because of you, thousands more Canadians are learning to Beat the Bank! Please consider forwarding this email to family and friends. It may spark an interesting conversation.

If you have any questions or comments, just email me at larry@larrybates.ca.

All the best!


Investment Advice for Affluent Canadians
Some investors prefer ongoing advice. I offer full-service, ongoing investment advice and financial planning for clients with portfolios of $1.5 million+. My clients benefit from greatly reduced fees and portfolios which are tailored to match their personal objectives, time frame and risk tolerance. If my service might be of interest to you, just reply to this email and we can set up a call to discuss.

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