After ending the year 2023 on a high note, one might have expected some consolidation of stock prices during the first quarter of 2024. But this was not the case.
The S&P 500 index maintained the pace and added more than 10% of value to the US stock market, as the technology sector continued to benefit from the craze for everything related to artificial intelligence. The Canadian S&P/TSX index, less heavily weighted in technology stocks, still gained nearly 6%. With the exception of the telecoms, the big loser, and utilities sectors, all other sub-indexes of the Toronto stock market have benefited from interesting improvements over the last three months with health care at the top of the list. health, energy and industrial sectors.
Quebec inc. participate
Several securities of large Quebec companies benefited from the continued stock market rise in the first quarter. Consulting engineering firms WSP ($209.80) and AtkinsRealis ($54.41) (formerly SNC-Lavalin) were the big winners with respective appreciations of 21% and 30%. Without forgetting the National Bank, which has shown no signs of slowing down, continuing the recovery that began in late October, with the stock price rising from $84 to $113. As for Dollarama, whose stock had corrected 7% in March, fourth-quarter results released Thursday showed comparable sales rising 8.7% and profits rising more than 26%, boosting the stock’s price to reach a new high of $113.45. Management announced a significant increase in its quarterly dividend from 7.1 to 9.2 cents per share.
The fall of telecoms
Securities that are among the favorites of many savers-investors given the growth of the sector and the generous dividends they offer, the shares of telecommunications companies, including BCE ($45.94) and Rogers Communications ($55.30) are experiencing their share of difficulties in recent years and have been subject to a discount by most analysts who follow the sector. Tim Casey, analyst at BMO Capital Markets, was the last to comment last week by lowering his rating on both BCE, Rogers, Quebecor ($28.68) and Telus ($21.63). Among other things, he points to weaker growth prospects as competition increases, and the fact that he sees no catalytic element on the horizon.
Bond yields remain negative
At the start of the year, it was reasonable to believe that the bond market would offer a positive return, starting in the first quarter, when we were approaching, it was believed, the start of a cycle of rate cuts of interest. Remember that a drop in rates leads to an increase in bond prices, thus increasing the yield. That will have to wait. The overall Canadian bond index had a negative return of 1.22% for the first quarter.
Rate cuts later in the US
Several leaders of the American Federal Reserve (Fed) and certain regional Federal Reserves spoke with great restraint last week regarding possible reductions in interest rates. Raphael Bostic, president of the Atlanta Federal Reserve, expressed his concern about inflation in an interview with CNBC on Wednesday and indicated that he did not expect a rate cut until much later this year. “Strong productivity, a reestablished supply chain and a resilient labor market suggest that inflation will fall much more slowly than many people expect,” he says. He only plans one more rate cut, and that towards the end of the year. On Friday, it was the turn of Neel Hashkari, president of the Minneapolis Federal Reserve to add, stating the possibility that there would be no rate cut by the Fed in 2024 if inflation remains so resilient.
Among the stocks that recently reached a high of the last 52 weeks, we note among others Royal Bank ($137.61), BMO ($131.46), Canadian Natural Resources ($108.27), Suncor ($52.46) and Dollarama ($113.45). Quebecor ($28.68) and Lululemon (US$356.75) reached a 52-week low.