2023 Year in Review in Canada: Interest Rates, Megacaps and a Year-end Rally

2023 year in review

Every year we look back at the trends and events that shaped the investment landscape. Here’s what we saw in 2023.

After last year’s market course correction, 2023 brought continued volatility and rising interest rates, which led to market dominance for the technology megacaps, defined as companies with a market cap above $200 billion. Meanwhile, interest in impact investing continued to grow and expand.

A year in two halves

We started the year with high interest rates, and a newly introduced Generative AI tool that disrupted the tech sector and drove the Magnificent Seven stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) to domination¹

In the second half of the year, or more precisely, the last third, a market rally driven by a pause in the Federal Reserve’s interest rate hikes² was a boon for investors. “The markets celebrated and rallied on the good news that the Fed had finished its job – for now,” says Wayne Wachell, Executive Chairperson and Co-Chief Investment Officer at Genus.

Other economic trends included:

  • A decrease in the inflation rate 
  • Continue interest rate increases but a more gradual rise than we saw in 2022 
  • Weak economic growth but no recession (yet)
  • Poorly performing bond markets

Sector performance favoured tech and energy

portfolio manager reviewing tech and energy sector performance

The tech and energy sectors performed well in 2023, and in tech it was thanks to the Magnificent Seven. “The Magnificent Seven are massive companies, and size mattered – especially in the first half of this year,” says Mike Thiessen, Chief Sustainability Officer and Chief Co-Investment Officer at Genus. “Having these companies in your portfolio was a big determining factor for how your portfolio would have performed.”

Conversely, sectors where high interest rates can have a negative effect meant poor performance for real estate, health care and utilities.

Political and geopolitical conflicts continued

As the Russia/Ukraine conflict raged on, a new surge in conflict between Israel and Palestine added to social tensions worldwide, and caused oil prices to climb³. But Wachell says neither conflict had much of an impact on the markets in 2023. 

Meanwhile, the US made strides to improve its relations with China⁴, stalling potential conflict over Tawaii as it prepares to enter an election year.

More climate change records were shattered

road flooded due to climate change

2023 once again broke temperature records around the world with the hottest summer ever recorded⁵. Natural disasters abounded – from fires and floods to mega-storms, producing the all-time highest number of billion-dollar disasters⁶ in the U.S.

But Thiessen maintains the markets continue to ignore a lot of this. “We look at a statistic called Climate Value at Risk (CVAR),” he says, “which reflects the percentage of a company’s value that could be destroyed by climate change or a lower carbon economy. A lot of mainstream companies would have a CVAR of 40% to 60%,” he says, “meaning that’s the percentage of their business that could be wiped out by climate change. It’s huge, but the market doesn’t seem to care.”

Except the insurance industry, that is. “The insurance industry is seeing the effects of these natural disasters and companies are drastically raising their rates,” Thiessen adds. “In some areas, they’re no longer insuring⁷ real estate or businesses.”

ESG and impact investing sparked renewed interest

We saw renewed interest in ESG and impact investing in 2023, though “it’s not quite back to its heights in 2020 and 2021,” Thiessen says. 

One particularly hot impact focus for 2023 was investing for Indigenous reconciliation. “This was big among impact and sustainable investors,” Thiessen says. “We’ve done engagement with public companies to have them set up Indigenous policies and to get their Progressive Aboriginal Relations (PAR) certification. This essentially shows that you’ll be onside with Indigenous communities.”

Genus also launched an Indigenous conflict screen to screen out companies that are in conflict with Indigenous communities from our sustainable and impact funds. 

2023’s big investing takeaway

portfolio manager reviewing 2023 investments

Invest in the mega caps! “If you look at how well they’ve done, there’s really no comparison with the rest of the market,” Thiessen says. “So a big learning this year is the importance of having a position in the mega caps that run the equity markets – if they’re aligned with your values.” 

As signs of economic slowdown begin to show, both Wachell and Thiessen suggest investors stay on their toes. “There’s often a big rally right before a recession,” Thiessen says. And we’re seeing that play out now. “You don’t want to miss out on the entire rally just so you miss the recession,” he adds.

“Right now, we’re watching and waiting,” Wachell says. “Our models help point the direction and they’re holding us in equities and keeping us where we should be.”

Join us on January 25th in person or via livestream for an in-depth year in review and outlook on 2024. 


  1. One chart shows how the ‘Magnificent 7’ have dominated the stock market in 2023 (no date) Yahoo! Finance. Available at:–TEXImOZi4Rn7MIxtXHGRfsvznWg_ekPBpIMi73DABROZUyQCeMvp8x8u_WxpScXuhuS3eeElxFo14wY7FjHkrCqe8pmB-wEHGIO-rbKi24z1xnKGIfViuBAJ2 (Accessed: 11 December 2023).
  2. Rugaber, C. and Press, T.A. (2023) Jerome Powell’s Federal Reserve is still on pause when it comes to rate hikes-for now, Fortune. Available at: (Accessed: 11 December 2023).
  3. Why oil prices are rising amid the israel-hamas war (2023) The Guardian. Available at: (Accessed: 11 December 2023).
  4. Chengevelyn (2023) U.S.-China relations are now more about crisis prevention, CNBC. Available at: (Accessed: 11 December 2023).
  5. ‘smashed’: Summer of 2023 the hottest ever recorded (2023) The Guardian. Available at: (Accessed: 11 December 2023).
  6. Andrews, H. (2023) 2023 claims all-time highest number of billion-dollar disasters, NOAA says, FOX Weather. Available at: (Accessed: 11 December 2023).
  7. Flavelle, C., Cowan, J. and Penn, I. (2023) Climate shocks are making parts of America uninsurable. it just got worse., The New York Times. Available at: (Accessed: 11 December 2023).

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