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Market update Q1 2024

Sunil Heda

Updated: Nov 5, 2024

2024 starts off with a bang!

 

Global markets stormed out of the gate in the first few months of 2024. The combination of a resilient consumer base and lower inflation levels created a positive backdrop for investor optimism. The S&P 500, S&P/TSX Composite, and the MSCI World Index were up 10.2%, 5.8%, and 8.4%, respectively, in the first three months of the year. Bonds showed up to the party late—Canadian and U.S. bonds (measured by the FTSE Canada Universe Bond Index and Bloomberg US Aggregate Bond Index) were down 1.2% and 0.8%.

Market update

Here's a deeper look at the factors at play to start the year:

 

Global economy. The global economy continued to slow but has remained resilient. Excess savings accumulated by consumers during the pandemic, along with a robust job market, have provided a buffer against some economic difficulties. With interest rates above their short-term levels, it’s expected that the global market update economy will continue to slow. While there is debate over whether Canada and the U.S. will enter a recession in 2024, these economies are likely to at least experience a slowdown in growth.

 

Equities. Company profits were one factor supporting equity returns. U.S. companies saw a solid profit growth of nearly 8% in the recent quarter, as measured by the S&P 500 Index. In contrast, Canadian companies faced challenges with a decline of nearly 9%, as measured by the S&P/TSX Index. This difference in profit profile helps explain the performance gap between these two indices. Markets often respond to immediate events and news. Looking ahead in the near term, a lack of significant developments may lead to a pause or modest correction. However, the longer-term environment remains optimistic.

 

Inflation and interest rates. Inflation peaked in the summer of 2022 at 8.1% in Canada and 9.1% in the U.S. Since then, it’s fallen to 2.8% and 3.2% as of this past February. As a result, the Bank of Canada and the Federal Reserve have likely paused their interest rate increases. Investors are anticipating a shift towards rate cuts in 2024, with expectations of around three cuts of 0.25% each. While these predictions are likely to change based on economic conditions, it’s much more certain that any cuts will likely occur in the second half of the year.

 

We believe that equities are “priced for perfection” with markets expecting to avoid a recession, a gradual decline in inflation, and central banks cutting interest rates. In this environment, any headline surprises that state otherwise may create potential choppy markets in the near term, but that could create opportunities for selecting individual stocks that outperform.

 

The biggest hurdle to making money in the markets is the ability to stomach the roller coaster ride.


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Sunil Heda, CPA (US), CIM®
Heda Investments​

Investment Advisor and Associate Portfolio Manager,

Manulife Wealth Inc

Life Insurance Advisor,

Manulife Wealth Insurance Services Inc.

Investment dealer dealing representatives (“Investment advisors”) registered with Manulife Wealth Inc. offer stocks, bonds, and mutual funds. Heda Investments is a trade name used for dealer business only. Insurance products and services are offered through Manulife Wealth Insurance Services Inc. Banking products and services are offered by referral arrangements through our related company Manulife Bank of Canada. Additional disclosure information will be provided upon referral. Please confirm with your advisor which company you are dealing with for each of your products and services. Manulife Wealth Inc. is a member of the Canadian Investment Regulatory Organization and the Canadian Investor Protection Fund. Manulife Wealth Insurance Services Inc. is a licensed life insurance agency authorized to do business across Canada. Manulife, Manulife & Stylized M Design, Stylized M Design and Manulife Wealth are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates, under license.. The Advisor and Manulife Wealth Inc. and/or Manulife Wealth Insurance Services Inc. ("Manulife Wealth") do not make any representation that the information in any external linked site, document or information is accurate and will not accept any responsibility or liability for any inaccuracies in the information not maintained by them, such as linked sites. Any opinion or advice expressed in a linked site should not be construed as the opinion or advice of the advisor or Manulife Wealth. The information in this communication is subject to change without notice. This is not an official publication of Manulife Wealth. This publication contains the opinions of the writer and may not reflect the opinions of the Advisor and Manulife Wealth Inc. and/or Manulife Wealth Insurance Services Inc. (collectively, "Manulife Wealth"). The information contained herein was obtained from sources believed to be reliable. No representation, or warranty, express or implied, is made by the writer, Manulife Wealth, or any other person as to its accuracy, completeness, or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any of the securities. The securities discussed in this publication may not be eligible for sale in some jurisdictions. If you are not a Canadian resident, this report should not have been delivered to you. This publication is not meant to provide legal, financial, tax or investment advice. As each situation is different, you should consult your own professional advisors for advice based on your specific circumstances.By submitting your contact details, you are providing us with your express consent to contact you or send you commercial electronic communication related to investments and/or insurance services that may be of interest to you. Should you wish to discontinue receiving communication or be contacted from our office, you may contact us to withdraw your consent at any time. Your personal information will not be distributed, sold, or traded; it will remain strictly confidential and will only be used for the purpose for which it was provided. For more information on our commitment to privacy and responsible use of information, please see  our Privacy Policy page.

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