Welcome to 2024! I hope everyone had a good Christmas break to recharge and get ready for 2024.
There was no Weekly Update for the last week of 2023, however, that does not mean all was quiet here. There were a few minor changes to the web site. As you may have noticed, the website received a fresh, new look and feel towards the end of 2023.
To better see how the stock market indexes were trending, tables were introduced in the general market review section of the Weekly Market and Portfolio Review section. Since tracking the streaks of the indexes seemed like a good idea, I thought “why not track the streaks of the portfolios.”
Even though the portfolios were riding win streaks to end 2023, I decided to start the portfolio tracker effective January 1, 2024. Hopefully, the streaks will reach a 52 week weekly win streak. 😊 Finally, a behind the scenes change to the grammar style on the site. Whereas the previous style was ‘formal,’ it has been changed to ‘professional.’
The new streak tables are intended to make the information easier to understand, while the updated grammar style was done to make the posts easier to read. As for the improvement in investing, that is still a work in progress. 😊
So…. in the words of Daenerys Targaryen when she was at Dragonstone, planning to take the Iron Throne, “Shall we begin?”
Items that may only interest or educate me ….
Canadian Economic news, US Economic news, Changes at the FOMC, ….
Canadian Economic news
This past week’s key economic data that the Bank of Canada (BoC) considers when deciding whether to raise or lower the interest rate.
Labour Force Survey (LFS)
Statistics Canada’s LFS for December showed employment was essentially unchanged, adding 100 jobs in December after adding 24,900 jobs the month before. The number of new jobs was well below analysts’ prediction of 13,500 jobs. Meanwhile, the unemployment rate remained at 5.8%, the same as in November. Analysts had forecast a slightly higher unemployment rate of 5.9%.
The size of hourly wage increased to 5.7% from 5.0% in November. That is the highest pace since January 2021. On an annual basis, average hourly wages increased 5.4% after rising 4.8% in November.
Fewer jobs and steady unemployment indicate the Canadian economy continues to slow but an increase in the pace of wage growth would be worrisome to the BoC. Higher wages put upward pressure on inflation.
The flatlining employment figure points to a potential slowdown in the labour market, a shift from the consistent job growth seen in the first part of 2023. This is consistent with Canada’s stagnant Gross Domestic Product over the last few months. The mixed picture presented by the unchanged unemployment rate and slowing job growth, alongside persistent wage increases, might lead the Bank of Canada to adopt a more cautious approach to monetary policy decisions. They will need to balance controlling inflation with supporting a fragile economy.
Canadian market volatility
The Canadian Volatility Index (VIXC), represented by the TSX 60 VIXI, ended the week at 11.55, higher than last week’s reading of 10.82. This increase suggests investors perceive a higher level of volatility. A dismal jobs report that came in lower than expected has investors worried the Canadian economy may fall into a recession.
The VIXC’s “high” and “low” volatility thresholds are generally defined as readings above 20 and below 20, respectively. Therefore, the current level of 11.55 indicates a relatively calm market environment.
US Economic news
This past week’s key data points that the Federal Reserve (Fed) considers when deciding whether to raise or lower the interest rate.
Fed meeting minutes
The Federal Open Market Committee (FOMC) released the minutes from its December policy meeting, revealing a cautious optimism that inflation risks have ‘diminished’ and are finally heading towards their 2% target. While price pressures showed downward trends due to factors like lower energy prices and slowing wage growth, the Fed remains committed to holding the current rate of 5.5% until inflation is “sustainably” on track.
While none of the members anticipate immediate rate hikes, the minutes acknowledge the possibility of further increases if inflation does not follow the estimated downward trend. This cautious stance reflects their awareness of potential economic risks caused by higher rates, such as a slowdown in growth and headwinds from the global economy. Like a pilot navigating turbulence, the Fed plans to closely monitor the situation and adjust course as needed, balancing inflation control with economic stability.
Officials are hopeful the economy will experience a ‘soft landing,’ where the economy manages to slow down gradually after a period of robust growth, avoiding a full-blown recession. Unfortunately, the minutes did not provide any insight as to when the interest rate may start to be lowered, leaving many wondering if the wait will be longer than they had hoped. ☹
Labour
Job Openings and Labor Turnover Survey (JOLTS)
The latest JOLTS report showed the number of job openings in November remained relatively unchanged from October, coming in at 8.8 million, the lowest it’s been in almost three years. The number of openings was up slightly from 8.733 million in October, but below analysts’ expectations of 8.85 million.
While the number of job openings remains high, it continues to fall from a high of twelve million in March 2022. The number of hires also decreased, down to 5.5 million from 6.1 million in October. This might suggest a slight slowing in hiring, potentially due to seasonality or a slowing economy caused by higher interest rates or global economic headwinds.
ADP employment
The December ADP employment report showed an increase of 164,000 jobs, surpassing November’s reading of 103,000 and easily beating analysts’ projections of 115,000 new jobs. The bulk (155,000) of new jobs came in the service-providing sectors. Annual wages were up 5.4% on annual basis, slightly lower than November’s 5.6%.
Bureau of Labor Statistics’ Employment Situation Summary (ESS).
The Bureau of Labor Statistics ESS report for December showed nonfarm payrolls rose by 216,000, up significantly from November’s increase of 199,000. Analysts had been expecting 170,000 new jobs. Meanwhile, the unemployment rate held steady at 3.7%, unchanged from November. It was the 23rd consecutive month the unemployment rate was below 4%. Finally, average hourly earnings grew by 0.4% in December, after climbing 0.4% in November. On an annual basis, wages are up 4.1%, up slightly from November’s 4.0% increase. If wages continue to grow at that pace, they could put upward pressure on inflation.
Labour summary
Overall, these three reports showed signs of a strong economy with a resilient labour market and a high demand for workers, rising wages while the inflation continues to fall. However, signs of a potential slowdown in in the pace of hiring activity are starting to appear. Plenty of jobs while the economy slows is good news for the Fed as it suggests they have brought down inflation without killing the labour market. However, the Fed will have to pay close attention to continued job growth and low unemployment that could cause the Fed to maintain the current 5.5% rate longer than anticipated.
American market volatility
A key gauge of market uncertainty on Wall Street, the CBOE Volatility Index (VIX), rose to 13.35 at the end of the week, after registering 12.45 the previous week. The increase suggests investors are seeing greater uncertainty and risk in the market, potentially leading to more volatility. A possible explanation is investors may believe the markets may have gotten ahead of themselves and a pullback is to be expected after a two-month long rally. There is also uncertainty about when the Fed may start to lower the interest rate which often leads to a rise in the VIX.
The VIX is a measure of the market’s expectation of short-term volatility based on S&P 500 options prices.
Changes at the FOMC
Each year the Fed’s FOMC rotates its voting members. While all 19 Fed policymakers, including non-voters, take part in the policy debates that shape the decisions, it is only those members of the FOMC that vote on any changes. The four new members will join the seven permanent Fed Board of Governors on the FOMC.
Effective January 1, 2024, the new voting members include Raphael Bostic, President of the Atlanta Fed; Loretta Mester, President of the Cleveland Fed; Thomas Barkin, president of the Richmond Fed; and Mary C. Daly, President of the San Francisco Fed. Ms. Mester and Mr. Barkin are viewed as more hawkish, advocating for stricter monetary policy (higher rates) to control inflation. Ms. Daly and Mr. Bostic are more centre oriented, focused on data-driven decision-making and advocating for a balanced approach between managing inflation and supporting economic growth.
Leaving the Fed were the more dovish Austan Goolsbee, President of the Chicago Fed, and Patrick Harker, President of the Philadelphia Fed, and hawks Lorie Logan, President of the Dallas Fed, and Neel Kashkari, President of the Minneapolis Fed.
With this year’s four new voting members, the committee takes on a more aggressive stance. The four new members of the FOMC have generally held hawkish (bias towards higher rates) positions regarding inflation control. This does not mean they will increase the US interest rate, but it could suggest a slower pace of rate cuts compared to initial market expectations. While the new FOMC composition might indicate a slightly later and more gradual pace of rate cuts, it does not necessarily rule out three reductions in 2024 as originally indicated at the last FOMC meeting.
If you are interested in finding out more about the Fed and the FOMC, check out this post on the Federal Reserve and the Bank of Canada.
With all the changes out of the way, let’s see what happened this past week….
Weekly Market Review
Monday: The global markets were closed for New Year’s Day.
Tuesday: After ending 2023 with a bang, the markets started the New Year on the wrong foot as three of the four major North American indexes – the Toronto Stock Exchange Composite Index (TSX), the S&P 500 Index (S&P), and the Nasdaq Composite Index (Nasdaq) – ended lower. The Dow Jones Industrial Average (DJIA) was the only index to end higher, barely making it over the flatline. Lower expectations of the Fed’s interest rates cuts weighed on the markets, especially the interest sensitive technology stocks.
In Canada, the higher costs of manufactured goods led to drop in demand causing production in Canadian factories to slow to its lowest pace since the beginning of the Covid-19 pandemic when most businesses were shut down. That is not a good sign for the Canadian economy. In trading, only three Canadian sectors advanced: Telecommunications Services, Energy, and Utilities. The biggest decline was in the Technology sector, which dropped four times as far as Healthcare, the next closest sector.
In the US, the S&P and Nasdaq were dragged down by Apple (NASD: AAPL) amidst talk of weakening sales of their newest iPhones. As well, the yield on US government bonds rose to almost 4% causing investors to move into the safer government bonds. In trading, Telecommunications Services and Healthcare were the biggest gainers, while technology and consumer Cyclicals suffered the biggest declines.
Wednesday: the markets continued to pullback as investors continue to take profits after the December run up, causing all four indexes to end in the red. The US labour market continues to cool as job openings reached their lowest point since March 2021. Oil prices rose after a disruption at a major oilfield in Libya as well as ongoing concerns that the conflict in the Middle East could disrupt global supply.
In Canada, the TSX ran its losing streak to two days as only three sectors made it into the green: Energy, Healthcare and Telecommunications Services. Consumer Cyclicals and Basic Materials (miners and fertilizer manufacturers) fell the deepest into the red.
In the US of A, the minutes from the Fed’s meeting in December showed officials felt the risk of higher inflation had diminished. Many of the sectors that soared in November and December are starting to give back some of their gains as the S&P endures its worst three day stretch since October. In trading, the Energy and Utilities sectors were the only ones to make it above the flatline, while Consumer Cyclicals and Industrials experienced the biggest decline.
Thursday: it was a mixed day for the indexes with the TSX and DJIA finishing in the green, while the S&P and Nasdaq ended in the red. Investors were disappointed the minutes from the last Fed meeting indicated the current interest rate could remain in place longer than investors would like. Oil prices fell as US gasoline inventories rose, recording their highest week over week increase in more than 30 years. The higher inventory suggests lower demand, causing oil prices to fall.
In Canada, the TSX finally broke into the win column for 2024, led by the Technology and Industrials sectors. The largest declines were in the Energy and Consumer Cyclicals sectors.
In the US, investors continue to take profits from the Santa Claus rally, keeping the S&P and Nasdaq out of the win column in the new year. The pullback has the S&P off to its worst start to a year since 2015, and the Nasdaq ran its losing streak to five, making it the index’s longest losing streak in over a year. In trading, it was a day of broad-based losses in the American sectors, with Healthcare and Financials the only sectors to advance. Among the sectors to end lower, Energy and Consumer Cyclicals suffered the biggest declines.
Friday: all four indexes ended the day slightly higher, although it was a hollow victory as all four indexes ended the week lower. Oil prices rose as rising tensions in the Middle East caused investors to worry about supply issues.
In Canada, investors have been rotating out of growth stocks that were hot in December and into value-oriented companies. A disappointing December jobs report led investors to believe the BoC will start lowering the Canadian benchmark rate sooner than originally expected. In trading, Healthcare and Technology gained the most, while Industrials and Consumer Cyclicals were the only Canadian sectors to lose ground.
In the US, the indexes were up and down like a rollercoaster as stronger-than-expected labour data muddied the waters about predictions of when and by how much interest rates would start to fall. In trading, Telecommunications Services and Financials posted the biggest gains, while Consumer Staples and Healthcare were the only two sectors to end lower.
Weekly Market and Portfolio Review
For the first week of 2024, the TSX (SPTSX) was down 0.1%, the S&P 500 (SPX) lost 1.5%, the DJIA (INDU) declined 0.6% and the Nasdaq (CCMP) slumped 3.2%.
| Index | Weekly Streak |
| TSX: | 1-week losing streak |
| S&P: | 1-week losing streak |
| DJIA: | 1-week losing streak |
| Nasdaq: | 1-week losing streak |
After a strong run up to end 2023, the first week of 2024 saw the American indexes break their respective nine-week weekly winning streaks, and the TSX snapped a 3-week weekly winning run. For the DJIA and the S&P, it was their worst start to a year since 2016.
This week’s pullback, and I hope it is only a pullback, was likely the result of analysts and investors reassessing recent economic data and seeing that the US economy and jobs remains strong. This is causing many of them to believe interest rate cuts may occur later than expected. Analysts originally felt cuts to the US benchmark would begin in March, but now analysts are thinking May is more likely. In other words, investor optimism shifted as they reassessed the economic landscape and its implications for monetary policy.
In Canada, the economy and jobs continue to shrink, while wage gains exceeded expectations. The stagnating economy is helping to lower inflation but the increase in wages puts upward pressure on inflation. This makes it hard for the BoC to decide when to start lowering the Canadian benchmark rate. While some Canadians might like to think the Canadian economic situation moves the markets, the truth is the American economy is almost ten times as large and is what really moves the markets. When America sneezes, Canada catches a cold. 😊
This second look at the current economic situation opened the door for investors to take some money off the table after the two-month long rally. When the market moves upward that much and that quickly, it is only a matter of time before investors decide to protect the gains they made during the rally.
| Portfolio | Weekly Streak |
| Portfolio 1: | 1-week losing streak |
| Portfolio 2: | 1-week losing streak |
| Portfolio 3: | 1-week losing streak |
As you can see in the chart below, the Portfolios began 2024 on a sour note with all three portfolios declining in value. The momentum from the previous two months did not carry over into the New Year, with the Portfolios stumbling out of the gate. With all four indexes ending the week lower, it was no surprise to see all three portfolios lost value this past week.
Portfolio 1 was the best performer over the past week, dropping the least amount. The Canadian companies in the portfolio seemed to fair better than the American companies. Unfortunately, the sizable movers (companies that saw their share price move more than 10% up or down) were all down. ☹. These were Lightspeed Commerce (TSE: LSPD) down 12.5%, Rivian Automotive (NASD: RIVN) down 19%, Unity Software (NYSE: U) down 10%, Navitas Semiconductor (NASD: NVTS) down 16%, and FuboTV (NYSE: FUBO) down 10%. Of these five companies, Lightspeed Commerce was the only Canadian company in the group.
Portfolio 2 had the biggest drop of the three portfolios because of a notable drop of MongoDB (NASD: MDB), down 12%. Otherwise, the portfolio had an even mix of stocks that finished the week higher and lower. Finally, other than Unity Software shedding 10% of its share price value, Portfolio 3 had no significant movers this past week.
While this week was not ideal, it is important to remember that market and portfolio fluctuations are inevitable. I am focused on my long-term goals, so I view this as a speedbump on my way to higher returns.
Companies on the Radar
During a two-week break of the Weekly Update, four new companies came across my radar:
- Kinaxis (TSE: KXS), a Canadian mid cap company. that provides cloud based supply chain solutions to customers around the world. Broken supply chains have been blamed as part of the reason for higher prices globally. Companies should be interested in improving their supply chains and Kinaxis could benefit from that tailwind. A mid cap company has a market value, number of shares outstanding multiplied by the market price, between $1 billion – $4 billion.
- MP Materials (NYSE: MP), an American mid cap company that mines and produces rare earth materials. Rare earth minerals are crucial elements in the production of electric vehicles (EV) and other electric products such as smartphones, computers, wind turbines, and various high-tech devices. This company could ride the tailwind of electrification.
- Jacobs Solutions (NYSE: J), an American large cap (market capitalization between $4 billion – $200 billion). The company provides a wide range of professional services including consulting, technical, scientific and project delivery for the government and private sector. They are engaged in a number of sectors including Advanced Manufacturing, Cities & Places, Energy & Environment, Health & Life Sciences, Infrastructure, National Security and Space. They are a company in a wide range of markets and this diversity should help them to grow consistently into the future.
- Lumine Group (TSE: LMN), a young Canadian mid cap company that acquires and strengthens communications and media software companies. They are a spin off from Constellation Software (TSE: CSU), a highly successful software company that acquires, manages and builds industry specific mission critical software solutions. If Lumine is half as successful as Constellation, Lumine will do very well.
The four companies mentioned above join the two holdovers from the December 22 radar list:
- McDonald’s (NYSE: MCD), the large cap American fast-food chain.
- Celestica Inc. (TSE: CLS), a medium sized Canadian company that manufactures electronic products and provides supply chain services to companies around the world.
The Radar Check was last updated January 5, 2024.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended January 5, 2024: DOWN 
- Tesla (NASD: TSLA) beat analysts estimate by delivering a record number of their EVs in the fourth quarter. The record delivery allowed Tesla to meet its 2023 target for deliveries. However, it was not purely due to customer demand as Tesla offered deeper discounts and six months of free fast charging if customers took delivery by the end of 2023.
In other Tesla news, the company is performing over the air remote upgrades to fix ‘Autosteer’ and doors unlocking and opening during a crash. The recall will cover over 1.6 million Tesla vehicles in China. - Apple stocks fell after two banks downgraded Apple stock to “underweight,” which is a polite way of saying “Sell.” Apple accounts for nearly 7% of the S&P. If the price of Apple shares fall it will require heavy lifting from the other 499 companies in the S&P 500 to offset Apple’s decline.
- Rivian Automotive was not as fortunate as Tesla, missing their estimate for fourth quarter deliveries by as much as 10%. The good news was it easily surpassed its target for the number of EVs the company produced in 2023.
- General Motors (NYSE: GM) was the top selling auto manufacturer in the US in 2023, up 14% from sales in 2022.
Activity
Sold: Voyager Digital Ltd. (OTCM: VYGVQ) I invested in this company when cryptocurrencies were all the rage. Rather than try to pick a winner amongst the various cryptocurrencies (Bitcoin, Ethereum, etc.) I invested in a company that was building a cryptocurrency platform trading in over fifty cryptocurrencies. As more people bought cryptocurrency, they needed to store and be able to make transactions. Voyager was quietly becoming a leading platform with no transaction fees, and great customer service. Alas, the cryptocurrency boom faded. Unfortunately, a company that Voyager had lent money went bankrupt and dragged Voyager and a few other companies down with it. Voyager is now worthless so getting rid of the reminder of the loss was simply a housekeeping task.
This was a ‘Swing for The Fences’ type of investment. I was hoping to capitalize on the cryptocurrency craze, and it blew up. I think my rationale for investing in Voyager rather than trying to pick a winner amongst all the cryptocurrencies was sound. The risk with ‘Swing for The Fences’ type investments is they come with a tremendous amount of risk. In this instance, it did not work out. It does not feel great to lose all my investment. As a result, I will be much more cautious next time I consider a ‘Swing for The Fences’ type investment.
Sold: WELL Health Technologies Corp (TSE: WELL) I invested in this company during the Covid-19 pandemic when telehealth was a major tailwind. The company was acquiring medical clinics across Canada and intended to improve the delivery of medicine throughout Canada. I felt it was the little brother of the American telehealth firm Teladoc Health (NYSE: TDOC). Three years later, telehealth is no longer a tailwind as many people are now able to see their doctor in person rather than via a phone or video call. WELL Health has seen its share price drop considerably over the last few years and the share price performance has not met my expectations. Since I am looking to reduce the number of companies in this portfolio, WELL Health became an obvious company to sell.
The pandemic really pulled telehealth forward to the point it is now a regular part of a doctor’s practise. Telehealth and telemedicine are still growing in their usage and capabilities, however, often people still need/want to see a doctor in person. The growth rate of telehealth companies has simply slowed as post pandemic life returns to normal.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Canadian National Railway Co (TSE: CNR)
Telus Corp (TSE: T)
Cargojet Inc. (TSE: CJT)
US $
NVIDIA Corp (NASD: NVDA)
Quarterly Reports
No quarterly reports this past week.
Portfolio 2
Portfolio 2 for the week ended January 5, 2024: DOWN
- Guardant Health (NASD: GH) named Terilyn Juarez Monroe as its chief people officer. The incumbent will be moving to an advisory role with Guardant.
- Alimentation Couche-Tard Inc. (TSX: ATD) announced they have closed the acquisition of selected retail assets from French company TotalEnergies (NYSE: TTE), a deal that was announced in March 2023. ATD acquired all of TotalEnergies retail assets in Germany and the Netherlands, and a 60% ownership stake in the Belgian and Luxembourg stores. In total ATD received 2,175 locations across the four European Union countries.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Brookfield Infrastructure Partners LP (TSE: BIP.UN)
Brookfield Infrastructure Corp (TSE: BIPC)
Brookfield Renewables Partners LP (TSE: BEP.UN)
Canadian Natural Resources Ltd (TSE: CNQ)
US $
No US$ dividends this past week.
Quarterly Reports
No quarterly reports this past week, except for per share data.
Portfolio 3
Portfolio 3 for the week ended January 5, 2024: DOWN
- Brookfield Asset Management Ltd (TSE: BAM) announced they will buy American Tower’s (NYSE: AMT) telecom tower business in India for US$2.5 billion. The deal will make Brookfield the largest operator of telecom towers in India as demand for data capabilities continues to grow. Based on the number of subscribers, India is the world’s second largest market.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Brookfield Renewable Corp (TSE: BEPC)
Brookfield Asset Management (TSE: BAM)
Brookfield Corporation (TSE: BN)
Brookfield Reinsurance Ltd (TSE: BNRE)
Brookfield Renewable Partners LP (TSE: BEP.UN)
US $
No US$ dividends this past week.
Quarterly Reports
No quarterly reports this past week.