2023 Annual Integral Investors Almanac 

A bison herd diverges on the winter prairie plains


As is usual in financial markets, events that unfolded through the final quarter of 2023 and the year as a whole were largely unexpected. US mega-tech stocks propelled US indices into a bull market, while forecasters were calling for a recession. War broke out in the Middle East and continued to deepen in Europe. We were overwhelmed by record-breaking heat in July and underwhelmed by global leaders at COP28. Greed and fear continue to take their natural course in markets. The universe continues to find a balance leaning forward through all the turbulence. That natural balance is a wave we continue to ride as ethical investors. We continue to place our faith in natural cycles of growth and destruction, we do our best to separate signal from noise, and remain rational investors in a volatile world.  

Painting the Context

While asset prices have increased since our last Almanac, we are not out of the woods yet. Rising inflation and a global economic slowdown continue to put pressure on individuals and businesses worldwide. Inflation has jumped a total of 18% since 2020 (Source), and we are all feeling the effects.  

These inflationary concerns resulted in central banks raising interest rates at a nearly unprecedented rate in 2023. This was an unpleasant shock for anyone holding debt or a mortgage, and the repercussions were felt throughout the world economy and global markets.  

This increase in interest rates had a particularly profound effect on bonds, and stocks that pay dividends. Nobody wanted to own a stock paying 3 or 4% dividends when GICs were paying 5 or 6%, so the price of these companies suffered. The same can be said of bonds, where prices fell as interest rates rose, and this traditionally safe corner of the investing universe suffered significant losses of over 10% in some instances. 

However, through the final quarter of 2023, both bond and equity markets rallied strongly on optimism that central bankers can successfully cool inflation without inducing a major recession or raising interest rates any further. The vast majority of our clients ended 2023 with positive overall returns. 

Against the backdrop of this uncertainty in 2023, big technology stocks rallied dramatically where most other equities failed to keep pace, especially the renewable energy sector. Mega-tech was bolstered by the artificial intelligence (AI) boom, posting gains that overcame worries of a banking sector crisis, a U.S. government debt default scare and ongoing conflicts in both the Middle East and Europe. A lot has happened, and it seems like markets have brushed it off. However, when you take a closer look, there is a serious bifurcation unfolding

Collectively, the stocks known as the “Magnificent Seven” Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Tesla, and Meta (Facebook)—gained almost 75% in 2023! Meanwhile, the remaining 493 constituents of the S&P 500 rose a more modest 12%, resulting in the index as a whole gaining 24% on a simple price appreciation basis for the year. In contrast the BMO Clean Energy Index gave up -20.38% in 2023. The chart below shows those numbers through November of 2023. 

Perhaps it is inevitable that human beings, as social animals, have an urge to compare themselves with one another. A flaw of human nature is that whatever we have is enough until we see someone else who has more. Comparison-created unhappiness and insecurity are pervasive in financial markets and Wall St. makes a large profit from it; generating commissions, collecting transfer fees, echoing fear only to buy up depressed assets once Main St. has sold off etc. It’s imperative that we see markets for what they are, stick to our long-dated vision and maintain our disciplined approach 

“Wall Street makes its money on activity. You make your money on inactivity.”

While the magnificent seven were earning stellar returns, most other corners of the market were not Renewable energy was down 20%, and dividend-paying stocks took a big haircut. Smaller ‘pre-profit’ stocks continued their 2022 struggles. As a result, environmentally conscious investors suffered a bit of a setback in 2023. 

That said, we have increased confidence in results moving forward into the coming years and decades. While the price of renewable energy companies has declined, we understand the need for renewable energy more than ever. While utilities have struggled, both Canada and the US have increased population bases to support growing utility and energy needs. While smaller companies have been in a skirmish to stay alive, we feel a societal shift towards small, more efficient, more decentralized business is inevitable, and a more natural state for economies. A diverse ecosystem is a healthy ecosystem.  

Hyper Concentration

The S&P 500 index performance this year is deceiving. The majority of the profit in the market this year has come from seven big tech companies that most of our clients do not care to be owners of on the grounds of their own ethics 

The concentration of the U.S. equity market in which the Magnificent Seven represent about 30% of the S&P 500’s market value is unprecedented. We are firm believers in physics and believe that what goes up must come down. While our minimal to no exposure to this corner of the market has detracted from performance, we believe it will aid performance moving forward. To give context on how massive the valuations of these companies have become, I would like to draw your attention to the MSCI All Country World Index, a benchmark that covers 85% of the global investable equity universe. The total weighting of the Magnificent Seven is greater than that of all stocks from Japan, France, China, and the U.K. combined. I will remind clients once again that the higher the price of any asset, the lower the expected return from here on out. When a company like Nvidia, for example, has experienced that much price appreciation, they must fire on all cylinders, performing exceptionally just to maintain their current stock price. We remind clients that stock prices are about expectations, not reality.  

With numerous solid businesses continuing to trade at discounts relative to their fundamentals and growth, the narrow Canadian and US equity market breadth offers many attractive investment opportunities as this bifurcation continues. We know that market leadership performance alternates between asset classes. Over the long-term, we believe that our clients’ portfolios are poised to outperform in a broad market recovery. 

The 2024 Election

2024 is an election year in the US. Without getting political here, a little-known fact is that another significant driver of investment performance this year may be the election down south, regardless of the outcome.  


Chasing Waterfalls

As you can see by the chart below, chasing last year’s best performing asset class is a woefully consistent unintelligent decision. It is our job to help our clients avoid the pitfalls of chasing last year’s returns. 

Tony and I captain a ship in a general direction our clients want to go, helping them deal with all the sea sickness along the way so they can sail their savings to where they need to go. The past two years have been a storm, and we are grateful for our clients who have stuck it through and are now beginning to see brighter days again. We remain unwavering in our conviction towards reasonably priced companies who support UN Sustainable Developemnt Goals and take ESG (Environmental, Social and Governance) integration seriously.  

p.s - Some More Good News

As a part of our holistic wealth management approach, we invest using both passive and active strategies. As a portion of the active management segment, many clients have exposure to NEI and Desjardins mutual funds. Leede Jones Gable is an independent wealth management house, meaning we are not incented to invest with one mutual fund company over another. We are proud to invest our own portfolios along with the assets we manage in both NEI and Desjardins funds, and so we are proud to present you with annual impact reports from both:  

  1. NEI Impact Report Q3 2023  
  1. Caisse Desjardins Report on Responsible Investment 

p.s.s - About the Bison...

We selected some Bison visuals for this annual update. This wasn’t just a pretty winter-themed picture, this was an intentional choice. I recently visited the Head-Smashed–In Buffalo Heritage Site in Southern Alberta. I was fascinated by the indigenous relationship with the Bison and the Bison’s cultural significance. Bison not only provided the tribe with food, shelter and tools, but the animal modeled how to live. To the Blackfoot, Bison also represent their spirit and remind them of how their lives were once lived, free and in harmony with nature.  

We seem to be back in a ‘bison’ market, if you willOur world is still suffering many storms, and while we are optimists, we are always planning for the worst and eliminating the possibility of those edge cases occurring as best we can. We welcome this changing world and are confident heading into 2024 despite all the issues and challenges that we face. We believe the mighty Bison have it right, these animals will face a storm head on, as it limits the amount of time it takes to weather that storm and how quickly the adversity is overcome. 

Wishing you all a meaningful 2024 and thank you for your continued trust.  


Joss & Tony  

The comments and opinions expressed herein reflect the personal views of Joss Biggins and/or Tony Edwards. They may differ from the opinions of Leede Jones Gable Inc. and should not be considered representative of the research beliefs, opinions, or recommendations of Leede Jones Gable Inc. View our full legal disclaimer here.

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