Christine Poole, chief executive officer and managing director at GlobeInvest Capital Management

FOCUS: North American Large Cap Stocks

MARKET OUTLOOK

Economic growth in 2024 should continue to slow as the lagged impact of high interest rates is fully absorbed. With inflation decelerating towards the target range, central banks are expected to hold interest rates steady over the near term and then pivot to rate cuts later next year.

For the first time since the rate hiking cycle commenced in March 2022, U.S. Federal Reserve Chair Jerome Powell indicated that officials were turning their attention to interest rate cuts because inflation had declined much faster than they expected. He noted that holding rates steady as inflation falls would lead “real” rates to rise and policy to become too restrictive. The reaction from both the stock and bond markets was overwhelmingly positive.

Lower interest rates and corporate earnings growth are required for stocks to hold their price gains and further appreciate next year. Market participants are now expecting the U.S. Fed will start easing in March 2024 and continue to trim interest rates as the year progresses. Based on consensus estimates, earnings for the S&P 500 companies are expected to be up a meager 2.5 per cent this year with profit growth accelerating to 11 per cent next year, suggesting a soft landing for the U.S. economy.

Macroeconomic forecasting is highly unreliable and financial markets tend to be volatile and reactive when actual outcomes deviate from expectations. Therefore, investors should stay invested within a portfolio asset mix that meets their risk tolerance level, return objectives and liquidity needs, and let the benefit of time and compounding grow their wealth over the long term.

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TOP PICKS

Alphabet (GOOGL NASD)

Alphabet is a global technology company, providing the world’s leading search engine, Google, and dominates in both global desktop and mobile search engine queries. The company is a beneficiary of the shift to online advertising, offering various digital advertising tools powered by artificial intelligence. Other revenue streams include Google Cloud, YouTube and Google Play.

Pembina Pipeline (PPL TSX)

Pembina is a leading North American energy infrastructure company. Its business is diversified across the energy complex with close to 70 per cent contracted under long-term take-or-pay or cost-of-service agreements. Pembina offers an attractive dividend yield of six per cent.

Thermo Fisher Scientific (TMO NYSE)

Thermo Fisher Scientific is a global provider of products and services to pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions, and government agencies as well as companies operating in food safety and process control settings. TMO supplies the “picks-and-shovels” or tools to healthcare companies that are needed to develop and manufacture drugs and vaccines and diagnose illnesses or diseases. In addition to organic growth opportunities, TMO has a proven record of making accretive acquisitions and applying its continuous improvement process to enhance financial performance. TMO offers a dividend yield of 0.3 per cent.

PAST PICKS: December 16, 2022

Dollar Tree (DLTR NASD)

• Then: US$142.65
• Now: US$134.68
• Return: -6%
• Total Return: -6%

Royal Bank (RY TSX)

• Then: $127.96
• Now: $133.61
• Return: 4%
• Total Return: 9%

S&P Global (SPGI NYSE)

• Then: US$339.60
• Now: US$432.08
• Return: 27%
• Total Return: 28%

Total Return Average: 10%