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 second quarter.
Economy
Inflation: Recent years’ central bank interest rate hikes had a positive impact on global inflation, which is currently well below the peak of summer 2022. In Canada, this rate dropped from a high of 8.1% to 2.9% as of April 30, 2024.
Key interest rates: We’ve reached the end of the money tightening measure (i.e., increased central bank rates), and market players are now expecting several rate cuts just around the corner.
On June 5, 2024, the Bank of Canada announced a 0.25% decrease in its key interest rate, thus becoming the first central bank from G7 nations to reduce its rate. It should be noted that the key rate hike cycle in Canada started back in March 2022.
In other G7 countries, the right time for rate cuts remains uncertain, since inflation keeps hovering at a level considered to be excessively high. These central banks want to avoid having inflation rise again if rates drop too drastically and quickly.
Recession: We’ve already noticed a substantial slowdown in Canada’s economic growth. Year-on-year growth in gross domestic product (GDP) was 1.1%, 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. What's more, the rate-cutting cycle may actually help the Canadian economy.
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). That’s why the rate-cutting cycle will probably be delayed until the end of 2024.
Markets
Equity: The economic conditions described above led to contrasting results, depending on the index.
The All-Country Equity Index recorded a return of 4.0% (in Canadian dollars). As was the case in 2023, securities related to artificial intelligence are responsible for a major portion of this index’s growth.
On the other hand, the Global Small Cap Equity Index performed at -1.7% (in Canadian dollars), and Canada’s main index (S&P/TSX) posted a return of -0.5%.
Bonds: We’re seeing lower bond yields as market players predict an easing (key rate cut) by central banks and an economic slowdown. As such, the FTSE Canada Universe Bond Index had a positive return of 0.9%.
2024 outlook
Balance: Several central banks responded robustly in 2022-2023, by raising their interest rate to reduce inflation—a successful measure that helped restore investor confidence. The market anticipates some central bank cuts in 2024. Investors are also expecting that the right balance will be struck 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 over 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 second quarter.
Economy
Inflation: Recent years’ central bank interest rate hikes had a positive impact on global inflation, which is currently well below the peak of summer 2022. In Canada, this rate dropped from a high of 8.1% to 2.9% as of April 30, 2024.
Key interest rates: We’ve reached the end of the money tightening measure (i.e., increased central bank rates), and market players are now expecting several rate cuts just around the corner.
On June 5, 2024, the Bank of Canada announced a 0.25% decrease in its key interest rate, thus becoming the first central bank from G7 nations to reduce its rate. It should be noted that the key rate hike cycle in Canada started back in March 2022.
In other G7 countries, the right time for rate cuts remains uncertain, since inflation keeps hovering at a level considered to be excessively high. These central banks want to avoid having inflation rise again if rates drop too drastically and quickly.
Recession: We’ve already noticed a substantial slowdown in Canada’s economic growth. Year-on-year growth in gross domestic product (GDP) was 1.1%, 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. What’s more, the rate-cutting cycle may actually help the Canadian economy.
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). That’s why the rate-cutting cycle will probably be delayed until the end of 2024.
Markets
Equity: The economic conditions described above led to contrasting results, depending on the index.
The All-Country Equity Index recorded a return of 4.0% (in Canadian dollars). As was the case in 2023, securities related to artificial intelligence are responsible for a major portion of this index’s growth.
On the other hand, the Global Small Cap Equity Index performed at -1.7% (in Canadian dollars), and Canada’s main index (S&P/TSX) posted a return of -0.5%.
Bonds: We’re seeing lower bond yields as market players predict an easing (key rate cut) by central banks and an economic slowdown. As such, the FTSE Canada Universe Bond Index had a positive return of 0.9%.
2024 outlook
Balance: Several central banks responded robustly in 2022-2023, by raising their interest rate to reduce inflation—a successful measure that helped restore investor confidence. The market anticipates some central bank cuts in 2024. Investors are also expecting that the right balance will be struck 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 over 20 years’ experience in financial markets.
