Market View

Quarter 1, 2024

US Economy’s Soft Landing

The Federal Open Market Committee (FOMC) is still monitoring the inflation indicators and employment payrolls.  Inflation levels were lower this quarter.  Federal Reserve Chair Jerome Powell has given indications that they may lower the Bank Rate three times this year – perhaps starting in June.  This expectation has put some money back into US equity markets. 

Fed’s mandate: to promote maximum employment and stable prices

The US Federal Reserve Board’s mandate is to promote maximum employment and stable prices.    “Maximum employment promotes business investment, boosting productivity and the economy’s long run growth potential.” (Fed Governor Lisa Cook’s speech, March 25, 2024).  US Labor Productivity growth was 2.6 percent last year, despite higher inflation numbers.

Low stable inflation provides price stability which reduces uncertainty.  In 2012, the FOMC set an inflation goal of 2 percent.  To fight inflation and slow down the economy, the FOMC raised the Fed Funds rate to 5.33% today from 0.33% in April 2022.  US core inflation retreated to 3.8% in February 2024, down from 6.6% in September 2022. The lower inflation numbers allow the Fed to contemplate lowering the Fed Funds rate.

Productivity is down in Canada

The Bank of Canada is warning that waning productivity growth in the country is an “emergency” that can force higher interest rates and limit rising wages for Canadians. (Globe&Mail, March 26, 2024).  Bank of Canada’s Senior Deputy Governor, Carolyn Rogers, gave a speech in Halifax in which she sounded the alarm on Canada’s lagging productivity rates.  Canada’s productivity ranks 28th among 39 OECD countries. 

PMC’s Take

The rally in the 1st quarter was influenced by a broader participation of stocks apart from a handful of technology stocks.  That has been most welcome for our diversified portfolios. We do find it curious that the market as a whole seems to be already accounting for lower interest rates to come.  We hope that inflation is managed well by the Central Banks sooner rather than later, but remain positioned for either outcome.

PMC is 60!

Continuing the history of Portfolio Management Corporation that was introduced in the Q4 2023 Commentary, 19 years after Richard Hurleburt started PMC, Bob McInnes, Chartered Accountant, joined the firm. It is hard to believe that in 1983 - Bob’s first year - the yield on the 10-year Government of Canada bond was 11% - a far cry from today’s 4% yield. Bob put his accounting skills to excellent use by assisting clients with their financial needs. Seven years later, in 1990, a young Fred Burton, CFA, walked through the door. He thoroughly enjoyed his first year with PMC as he had to navigate the almost 20% decline in the Dow Jones Index that year. Next quarter, we will continue with our look back at PMC history.


Q:  What are Bare Trusts?  CRA announced delay in reporting requirements.   

The CRA just announced that the reporting requirements (filing a T3) for Bare Trusts will be delayed until next year for 2024 Tax returns.  This delay will give clients, who may be in a Bare Trust and not know it, the time to ask their lawyers or accountants to confirm if their financial arrangement is or is not a bare trust.  For example, for some of our clients, the bare trust exists when the adult children are on their parents’ bank account, so that they can pay their parent’s monthly bills.  It depends on documentation, so check with your lawyer or accountant. 

Commentary reflects the opinions of Portfolio Management Corporation (PMC) at the time of writing and may reference sources that PMC believes to be accurate and reliable.  PMC does not guarantee the accuracy or completeness of such information and our opinions and viewpoints may change over time.  Forward-looking statements are based on historical events and trends and may differ from actual results.