Bâtirente’s Investment Strategy Manager, Jean-François Dumais*, provides these economic and markets highlights for 2024.
2024 ECONOMY
Inflation
As of November 30, 2024, inflation is at 1.9% in Canada (it was at 8.1% at its peak in the summer of 2022). In the United States, it was 2.7% at the same date.
Key interest rates
Since June 2024, the Bank of Canada has lowered its key interest rate by 0.25% on three occasions, and twice by 0.50%, causing it to decrease from 5.0% to 3.25%. Further decreases are expected in 2025, although the Bank of Canada will surely want to avoid having inflation rise again if rates drop too drastically and quickly.
In the US, the Fed (US Federal Reserve) brought its key interest rate down twice by 0.25% and once by 0.50%, i.e., from 5.5% to 4.5%. This rate is expected to drop only once in 2025 due to economic growth, which remains strong, and the potentially inflationary economic measures that the new president intends to implement.
Recession or no recession?
We’ve already seen a slowdown in Canada’s economic growth. Year-on-year growth in gross domestic product (GDP) was 1.9%, compared with 4.6% in the summer of 2022. If a recession were to hit Canada, it would likely be milder given the significant Canadian population growth, which helps stimulate the economy. What’s more, the rate-cutting cycle will probably help Canada’s economy.
Turning to the US, economic growth is still robust, with a 3.1% rise in gross domestic product (GDP). That’s why the rate-cutting cycle there started three months ahead of Canada’s and a recession is quite unlikely to happen in 2025.
2024 MARKETS
Equity
The economic conditions described above led to very positive results.
The all-country equity index performed extremely well, with a 28.1% yield (in Canadian dollars), which is attributed to the outstanding returns by US equities related to artificial intelligence (the Magnificent Seven). Similarly, Canada’s main index (S&P/TSX) posted a stellar return of 21.7%.
Bonds
We watched as short-term bond yields declined due to an easing (key rate cut) by central banks and fears of economic slowdowns. In response, the FTSE Canada Universe Bond Index had a positive return of 4.2%.
BÂTIRENTE DIVERSIFIED FUNDS’ PERFORMANCE IN 2024
Bâtirente Diversified Funds: between 8.8% and 16.6% (from least risky to most risky).
Treasury Multi Fund: 6.3%
Bond Multi Fund: 4.6%
Global Equity Multi Fund: 22.6%
Canadian Equity Multi Fund: 21.7%
Global Small Cap Equity Multi Fund: 11.8%
2025 OUTLOOK
Balance
The market is predicting several more central bank cuts this year, driving investors to expect the right balance to be struck between economic growth and inflation.
However, the impending arrival of a new American president might bring considerable volatility to the various asset classes.
More than ever, having a portfolio diversification strategy—as Bâtirente funds can provide you with—is crucial under these market conditions.
*Jean-François Dumais has worked as an Investment Strategy Manager at Bâtirente since 2019. Along with a Master of Business Administration (MBA) degree (Finance specialization), he has over 20 years’ experience in financial markets.