Want to be a better investor this year? Motley Fool Canada analysts Iain Butler and Nick Sciple discuss the big questions facing investors, how to invest in 2024, and what kind of stocks to buy now.
Watch time: 5 minutes (or transcript below)
Transcript
Nick Sciple: I’m Motley Fool Canada senior analyst Nick Sciple. And this is the “5-Minute Major” here to make you a smarter investor in about 5 minutes. Today we’re talking about the biggest questions ahead for the stock market in 2024, and my guest is Motley Fool Canada Chief Investment Officer Iain Butler. Iain, thanks for joining me.
Iain Butler: Good to be here, Nick, and let’s let’s get right to it. Clock is ticking.
Nick Sciple: Yeah, let’s do it. Iain, as we stand here at the beginning of 2024, what are your 3 biggest questions for Canadian investors looking toward the year ahead?
Iain Butler: For sure, with that in mind, I’m gonna focus on the Canadian market. What’s maybe ahead for the Canadian market in the year ahead? And I think the first question that I have in my mind is how is the Canadian housing situation going to evolve? I think we’ve got a pretty severe housing shortage in this country. There’s a very severe affordability issue with Canadian housing. And we’ve had an interest rate environment that is not conducive at all to the $251 billion of mortgages that are set to come due in 2024. So it’s expected that monthly mortgage payments could increase for people from anywhere from 25% all the way up to 54%.
And I don’t know about you, Nick, but that’s a hit to the old monthly budget. So the direct impact that I think housing has on the Canadian stock market is through the Canadian banks. They carry very heavy weightings in the TSX Composite, and their performance tends to dictate where that index goes from year to year. And then a slightly less direct impact is just on overall consumer spending here in Canada.
So I think it’s gonna be fascinating to see where we are. And I’ll circle back on that in a later part. So question 2, okay, we’re gonna speed this along because of the clock. Capital markets. So the question is, when are capital markets going to wake up to how significantly under-invested the resource sector has been over the past decade? We need commodities, copper, nickel and a plethora of others to drive the electrification of everything that’s expected to occur over the next decade. And there just has not been the appropriate investment to mine those resources. So I think that’s gonna be something we’ll have a close eye on as well. And thirdly, how is the U.S. stock market going to perform? We are Canadian investors, and throughout our services we offer both Canadian and U.S. stock recommendations.
And it’s undeniable that the Canadian market is influenced by the U.S. stock market. Just look at how the Canadian market performs on a U.S. holiday when the Canadian market is open. There’s no volume, nobody cares, nobody does anything. So the U.S. stock market matters. It’s very much driven by the technology sector, which is not something that we have here in the Canadian market, necessarily. And I think that’s another dynamic that we can consider here. There’s huge companies in the S&P 500 technology sector that really, just like the Canadian banks, dictate how the S&P 500 performs. And if technology continues to capture investors’ imagination, Canadian markets are probably gonna lag the U.S. again over the course of the year. That’s what’s on my mind.
Nick Sciple: And so we talked about questions about the real estate market. What could happen with commodities, oil and gas, and the big question of what’s going to happen in the U.S. investing market. With those questions in mind, Iain, what actions have you taken in your portfolio to prepare yourself for these questions that that are that are lingering in 2024?
Iain Butler: My personal portfolio is certainly influenced by our members-only services here at The Motley Fool. So personally, in my portfolio, I’ve actually been buying Canadian banks or adding to Canadian bank exposure. They are cheap. Everybody knows that this mortgage situation is happening. Everybody. It’s very well known that Canadian housing isn’t right, and I think that’s exactly how the banks are priced. The banks know what they’re doing, though, they’re great businesses, and they tend to be able to navigate these situations adequately. I think there’s an attractive setup there. So Canadian banks are attractive because of the question marks that are hanging over them. Same goes for resources. It’s not been a fun decade for resource-oriented investors. And that’s gonna change at some point. It’s a cyclical industry, and there’s no getting around that. We’ve dragged through the bottom. And there’s a rebound out there. So resource companies, I think, are attractive, too.
And I think technology, at some point the run’s gonna end there. There’s some big multiples in technology-land. And multiple contraction hurts. So we’ll see how that plays out.
Nick Sciple: All right, right on time. That’s it for us for this edition of the “5-Minute Major.” Thank you so much for joining us, and we’ll see you next time.