Ginsler Wealth Third Quarter 2023 Client Letter – Misunderstood Edition

(An audio version of this letter can now be found as Episode 29 of The Unlimited Podcast by Ginsler Wealth. Use the link provided or find us on your favourite podcast app.)

To Ginsler Wealth’s Clients:

As you all know, Ginsler Wealth produces The Unlimited Podcast, featuring investment and other topics we think would be of interest to you. This is especially true when we feature some of the managers and strategies we invest in on your behalf.[i] I love interviewing our guests and putting these together for you. I hope you enjoy them as well.

One of my favourite podcasts is Revisionist History, hosted by the famous journalist and author, Malcolm Gladwell. At the beginning of each episode, Malcolm describes his podcast as: “my podcast about things overlooked and misunderstood.”

As we take stock of the investing and economic landscape in 2023 so far, I would like to share with you what I believe is overlooked and misunderstood.


Looking at the S&P 500 Index, the main barometer of the U.S. equity markets, one might conclude that U.S. (public) companies are having a good 2023 – up 13%. This “misunderstanding” has been widely reported on so I can’t take credit for it. As you likely already know, the performance of seven large tech companies[ii] (which comprise more than 28% of the index’ weighting) has been strong. The “equal weight” S&P 500 shows quite a different picture – with the market up only 1% year to date. Excluding the Big 7, it’s been a pretty poor year so far.


The chart below shows the performance of the S&P/TSX Composite Index, the broadest measure of Canadian equity market performance, along with the performance of the S&P/TSX 60, which only includes some of Canada’s largest 60 public companies.[iii] The two lines are almost indistinguishable from each other and show a meagre 3% return year-to-date. We don’t appear to have the issue of a few large companies materially contributing to equity market performance.

However, in 2023, Canada has experienced a similar issue as the U.S. Two of Canada’s largest tech stocks – Shopify (once Canada’s largest company) and Constellation Software – have contributed over 3% of Canada’s stock market performance so far in 2023. This means that the rest of Canada’s public companies, measured as a whole, have had a negative 2023.


For those invested in the “traditional 60/40” stock and bond portfolio (not Ginsler Wealth clients), 2022 was a horrible year, as both stocks and bonds moved in the same direction: down. This year has been more of the same. The chart below shows that so far this year the performance of the broad-based equity and fixed income (bond) indices are quite similar. (As you know, your Ginsler Wealth portfolios (also) include alternative investment and income strategies, with the goal of generating reasonable returns while not necessarily acting similarly to traditional stocks and bonds.)


Given the pace of interest rate increases over the past year, it is surprising to me that consumers continue to feel good about current business conditions (Present Situation Index line below), but less surprising that they aren’t feeling so great about the near future (Expectations Index line below) …

Given consumers’ bleak expectations for the future, I would have expected to see (and government central banks are desperately hoping for) spending to slow down as people brace for impact. But what is happening instead? The highest spending levels in history continue. An October 1st Wall Street Journal article’s title says it all: American’s Are Still Spending Like There’s No Tomorrow.[iv] It is very hard to tame inflation if people don’t slow their spending.


Putting all these “things overlooked and misunderstood” together: we have equity markets that appear stronger than they actually are; bonds suffering alongside equities[v]; and persistent inflation causing consumers to expect tougher times ahead, but spend in a way that could very well lead to more interest rate increases, or at the very least, keep current rates higher for longer.


So, is the best approach today to simply take advantage of 5%+ Guaranteed Investment Certificate (GIC) rates? This is perhaps the most misunderstood course of action in long-term investing.[vi]

There are pros and cons when investing in GICs:

Pro: you are guaranteed to earn the stated interest rate.
Con: you are guaranteed to earn the stated interest rate.

In fact, the list of cons continues:

  • You will give away more than half your return[vii] to CRA, and therefore may not even earn an after-tax return above inflation,
  • You may need to lock your capital away for an extended period of time without being rewarded with a liquidity premium in the form of higher returns, and
  • You will potentially miss out on larger returns from other, more favourably-taxed, asset classes.

In short, for many investors, investing in GICs is the safest way to potentially not meet your long-term investing goals and objectives.


While the outlook may be uncertain (hint: it always is) and consumer expectations are being lowered, remember (as I reviewed in my last quarterly letter) that we are spending our time managing your investments with a focus on reducing volatility, protecting the downside, seeking tax-efficient high income-generating investments, and capitalizing on potential market stress/distress.[viii] We do the above while always maintaining exposure to equity markets[ix] as well because we don’t believe in trying to time the markets. We know from past history that equity markets will be the first to rise (and likely dramatically) upon the first hints of better times ahead. This should not be overlooked or misunderstood.


Thank you for your trust, support, and confidence. We are available 24/7 should you need us.


Brian singnature

Brian Ginsler
President & CEO




[i] For the balance of this letter, please recall that our clients have different investment goals, objectives, and risk tolerances, and therefore will have different portfolios, which may not include some of the strategies discussed on The Unlimited Podcast or detailed herein.

[ii] Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, NVIDIA, and Tesla.

[iii] The S&P/TSX 60 is a subset of the S&P/TSX Composite. It has 60 constituents and represents Canadian large cap securities with a view to reflecting the sector balance of the S&P/TSX Composite.

[iv] Article may be behind a paywall and not viewable if you don’t have a WSJ subscription. Sorry.

[v] Listen to The Unlimited Podcast Episode 17: Bonds… Just Bonds with Richard-Usher Jones to learn how bonds work and what happens to bond prices as interest rates rise…they go down.

[vi] If you have shorter-term cash needs, by all means invest in shorter-term (and ideally cashable) GICs.

[vii] For investors in the highest income tax bracket.

[viii] See endnote i above.

[ix] Also see endnote i above.

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