To help you better understand the performance of funds presented in your quarterly statement, Bâtirente’s Investment Strategy Manager, Jean-François Dumais*, shares the economic and market highlights of 2024’s first quarter.
Economy
Inflation: Central bank interest rate hikes of 2022-2023 continue to have an impact on global inflation growth, which is now well below the 8.1% peak reached in summer 2022. In Canada, inflation is less than 3% (2.8% at the end of February 2024).
Key interest rates: We can see the end of the money tightening measure (i.e., increased central bank rates), and market players now anticipate several interest rate cuts coming as of this summer. But what remains unclear is when, exactly, the best time is to reduce these rates, with inflation still hovering above the 2% target of North American central banks. The latter want to avoid having inflation rise again if rates drop too drastically and quickly.
Recession: The aim is to avoid creating a major recession, which could be on the horizon if rates remain high for an extended period. We’ve already noticed a substantial slowdown in Canada’s economic growth. Year-on-year growth in gross domestic product (GDP) was 0.8%, compared with 4.6% in the summer of 2022. Canada is likely headed for a recession, but one that will possibly be milder given the positive job market.
On the American side, we’ve also witnessed a slowdown in economic growth, although a number of investors believe that the American economy will be able to avoid a recession (two consecutive quarters of negative GDP).
Markets
Equity: The economic conditions described above have led to positivity in these markets. The all-country equity index recorded a return of 11.0% (in Canadian dollars); the global small cap equity index posted a performance of 6.8% (in Canadian dollars); and Canada’s main index (S&P/TSX) achieved returns of 6.6%. As in 2023, securities related to artificial intelligence are responsible for a major portion of index growth.
Bonds: We’ve been seeing rising rates, as market players have postponed the first of these central bank rate cuts to a later date. As such, the FTSE Canada Universe Bond Index had a 1.3% negative return.
Outlook for 2024
Balance: In 2022-2023, several central banks responded robustly by raising their interest rate to reduce inflation—a successful measure that helped restore investor confidence. Investors are hoping to find the right balance between economic growth and inflation.
*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 20 years’ experience in financial markets.
To help you better understand the performance of funds presented in your quarterly statement, Bâtirente’s Investment Strategy Manager, Jean-François Dumais*, shares the economic and market highlights of 2024’s first quarter.
Economy
Inflation: Central bank interest rate hikes of 2022-2023 continue to have an impact on global inflation growth, which is now well below the 8.1% peak reached in summer 2022. In Canada, inflation is less than 3% (2.8% at the end of February 2024).
Key interest rates: We can see the end of the money tightening measure (i.e., increased central bank rates), and market players now anticipate several interest rate cuts coming as of this summer. But what remains unclear is when, exactly, the best time is to reduce these rates, with inflation still hovering above the 2% target of North American central banks. The latter want to avoid having inflation rise again if rates drop too drastically and quickly.
Recession: The aim is to avoid creating a major recession, which could be on the horizon if rates remain high for an extended period. We’ve already noticed a substantial slowdown in Canada’s economic growth. Year-on-year growth in gross domestic product (GDP) was 0.8%, compared with 4.6% in the summer of 2022. Canada is likely headed for a recession, but one that will possibly be milder given the positive job market.
On the American side, we’ve also witnessed a slowdown in economic growth, although a number of investors believe that the American economy will be able to avoid a recession (two consecutive quarters of negative GDP).
Markets
Equity: The economic conditions described above have led to positivity in these markets. The all-country equity index recorded a return of 11.0% (in Canadian dollars); the global small cap equity index posted a performance of 6.8% (in Canadian dollars); and Canada’s main index (S&P/TSX) achieved returns of 6.6%. As in 2023, securities related to artificial intelligence are responsible for a major portion of index growth.
Bonds: We’ve been seeing rising rates, as market players have postponed the first of these central bank rate cuts to a later date. As such, the FTSE Canada Universe Bond Index had a 1.3% negative return.
Outlook for 2024
Balance: In 2022-2023, several central banks responded robustly by raising their interest rate to reduce inflation—a successful measure that helped restore investor confidence. Investors are hoping to find the right balance between economic growth and inflation.
*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 20 years’ experience in financial markets.
