Against a backdrop of rate hikes and jitters in the banking sector, the effects of tighter monetary policy remain the focus of our outlook for the remainder of 2023.The IMF has expressed concern about a global economy that is experiencing a gradual recovery that remains fragile, and it was noted that downside risks dominate in the April World Economic Outlook. Weaker than anticipated first quarter U.S. GDP is evidence that the recovery has a long way to go. In April, we maintained our twelve-month forward outlook for the U.S. economy, reflecting our expectation that the U.S. will fall into recession in the third quarter of 2023. Our Outlook remains six months of Stagnation, followed by three months of Recession and then three months of Stagnation.

The Chinese economy advanced 4.5% year over year in Q1 of 2023, accelerating from a 2.9% growth in Q4. A complex global environment and insufficient domestic demand indicate that the country’s recovery is not yet solid.1 China’s trade surplus widened in March 2023 from the same period a year earlier due to greater trade with developed countries although the trade surplus with the United States narrowed in March.2 China’s March consumer prices declined 0.3% from a month earlier.3 China’s surveyed urban unemployment rate declined to a seven-month low of 5.3% from February’s three-month high of 5.6%.4 The Eurozone posted their first trade surplus since September 2021 as exports climbed 7.6%, boosted by sales of manufactured goods and exports of fuels and food. Among major trade partners, exports increased to the U.K. (10.4%), Switzerland (10.4%), Norway (14%), the U.S. (10.9%), China (5.8%), and Turkey (27.6%), but declined sharply to Russia (-50.5%). Purchases rose from the U.K. (15.1%), the U.S. (5.9%), Turkey (8.4%), and Norway (3.5%), but were sharply down from Russia (-77.3%), Switzerland (-13.8%), and China (-4.3%).5 The annual inflation rate in the Euro Area was confirmed at 6.9% in March.6

The U.S. economy grew by an annualized 1.1% in Q1 2023, slowing from a 2.6% expansion in the previous three-month period, as rising interest rates continued to hurt the housing market and businesses reduced inventories.7 The annual inflation rate in the U.S. slowed for a ninth consecutive period to 5% in March. Food prices grew at a slower rate and energy cost fell.8 The unemployment rate in the United States edged down to 3.5% in March.9 The annual inflation rate in Canada fell to 4.3% in March, amid significant base-year effects for energy costs. The CPI also decelerated for food, due to lower prices for fruits and fresh vegetables.10 The unemployment rate in Canada was at 5% for a fourth consecutive month in March.11

Market volatility in the first quarter was characterized by turbulent swings in inflation and rate hike expectations, accompanied by shock waves from the demise of Silicon Valley Bank, Signature Bank, and Credit Suisse. Boosted by Information Technology, the S&P 500 posted a gain of 7.5% in Q1, outpacing smaller caps, with the S&P Mid Cap 400 up 3.8% and the S&P SmallCap 600 up 2.6%. U.S. fixed income index performances were positive for the quarter, largely due to a decline across the Treasury yield curve in March. The Canadian S&P/TSX Composite rose 4.6% for the quarter, with Information Technology up 26.5%, while Energy was the worst performer, down 2.3%. The S&P Europe 350 ended the quarter up 8.7%. Fourteen of sixteen countries contributed positively to European equity returns in Q1. The S&P Pan Asia BMI extended its year-to-date gains in March, rising 2.8% to end the quarter up 4.5%. Nine of 14 S&P Pan Asia BMI regions contributed positively to the benchmark’s Q1 returns, with Japan’s contribution the most pronounced at +2.0%, followed by Taiwan with +1.2%.

In April, we maintained our asset allocation from March, including the presence of gold and the twenty percent cash position across all models. We continue to maintain short duration exposure to fixed income and a greater exposure to Canadian equities over U.S. equities as we anticipate the reporting of weaker first quarter earnings and a continuing weaker underlying economy through the remainder of 2023.

We are currently positioned for a recession in the U.S. in the third quarter. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.


Deborah Frame, President and CIO


1 Trading Economics. China GDP. April 18, 2023.

2 Trading Economics. China Trade. April 13, 2023.

3 Trading Economics. China Inflation. April 11, 2023.

4 Trading Economics. China Unemployment. April 18, 2023.

5 Trading Economics. EU Trade. April 20, 2023.

6 Trading Economics. EU Inflation. April 19, 2023.

7 Trading Economics. U.S. GDP. April 27, 2023.

8 Trading Economics. U.S. Inflation. April 12, 2023.

9 Trading Economics. U.S. Unemployment. April 7, 2023.

10 Trading Economics. Canada Inflation. April 18, 2023.

11 Trading Economics. Canada Unemployment. April 6, 2023.


Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. March 31, 2023. Index performance is based on total returns and expressed in the local currency of the index.