February 2023 Portfolio Management Team Update

Elvis Picardo

February 23, 2023

February 2023 Portfolio Management Team Update
By Elvis Picardo, CFA®, CIM, Portfolio Manager, iA Private Wealth
February 21, 2023

Market Review
Global equities rebounded in January from the December selloff, getting 2023 off to a strong start, as investors grew increasingly confident that central banks would ease up on their interest-rate hikes.

The TSX surged 7.1% in January, as all 11 constituent sectors advanced. The biggest sector gainers last month – technology (+19.5%) and health care (+14.4%) – were the biggest decliners in 2022; materials (+10.7%) and real estate (+10.4%) also posted double-digit gains. Defensive sectors such as utilities (+3.4%) and consumer staples (+1.9%) lagged the index.

U.S. equity indices also posted broad gains, led by the Nasdaq Composite’s 10.7% surge – its best start to a year since 2001 – while the S&P 500 rose 6.2% and the Dow Jones gained 2.8%. European indices recorded strong gains, as the Euro Stoxx 50 index soared 9.8% in January. Emerging markets also rebounded from last year’s declines, with the MSCI Emerging Markets index up 6.3%.

(Data Source: FactSet). 

Our Strategy
Market action so far in February suggests there may be more volatility ahead. Although investors were initially cheered by the Federal Reserve’s 25 basis-point rate hike on February 1 and Fed chairman Powell’s assertion that progress has been made in countering inflation, markets have subsequently been rattled by hawkish comments from Fed officials warning that additional interest rate increases are in store.

Robust economic data is making it increasingly difficult for central banks to maintain the balancing act of raising rates to quell inflation without tipping the economy into a deep recession. For example, employment growth in January was very strong and well above economists’ expectations, with the Canadian economy adding 150,000 jobs and the U.S. boosting employment by 517,000.

As a result, 10-year government bond yields in Canada and the U.S. have increased by 59 and 45 basis points respectively over the past month (as of February 21). The rapid rise in yields is pressuring equity markets, with the S&P 500 down almost 5% from its five-month high reached earlier this month, closing below the key 4,000 level on February 21.

The Portfolio Management Team (PMT) continues to opportunistically deploy inflows from clients, including contributions to registered accounts, to capitalize on the ongoing pullback. The PMT expects to maintain a defensive tilt to client portfolios in the first half of the year and will reassess its position as the murky economic picture gets clearer.

Please contact any member of the PMT if you have any questions or concerns regarding your accounts.

This information has been prepared by Elvis Picardo, who is a Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.