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 third quarter.
ECONOMY
Inflation: In Canada, the inflation rate dropped from a high of 8.1% in summer 2022 to 2.0% by August 31, 2024. The U.S. also saw a dip in their rate, from 9.1% at its peak to 2.5% for the same period.
Key interest rates: Since June 2024, the Bank of Canada has lowered its key interest rate by 0.25% on three occasions, causing it to decrease from 5.0% to 4.25%.
In the U.S., it was somewhat surprising that the Fed (U.S. Federal Reserve) brought its key interest rate down by 0.50% in September. The combination of a major decrease and rising unemployment led to this decision. Further decreases are expected, although the Fed will surely 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 1.5%, compared with 4.6% in the summer of 2022. If a recession were to happen in Canada, it would likely be weaker given the strong Canadian population growth (immigration), which helps stimulate the economy. What's more, the rate-cutting cycle may probably help the Canadian economy.
We’ve also witnessed a slowing of the American economy, even if many investors believe that a recession will be avoided. That's why the rate-cutting cycle started in Canada after a three-month delay.
MARKETS
Equity: The economic conditions described above led to very positive results.
The all-country equity index recorded a return of 5.3% (in Canadian dollars). In contrast with the first two quarters of 2024, where increases were overwhelmingly attributed to the artificial intelligence realm, most sectors and securities contributed positively in the third quarter.
The global small cap equity index also performed quite strongly (8.2% in Canadian dollars), as did Canada’s main index (S&P/TSX), which posted an excellent return of 10.5%.
Bonds: We saw bond yields decline dramatically, as market players predict additional easing (key rate cut) by central banks and an economic slowdown. In response, the FTSE Canadian Universe Bond Index had a very positive return of 4.5%.
OUTLOOK FOR 2024–2025
Balance: The market is predicting several more central bank cuts in 2024 and 2025, driving investors to expect 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 third quarter.
ECONOMY
Inflation: In Canada, the inflation rate dropped from a high of 8.1% in summer 2022 to 2.0% by August 31, 2024. The U.S. also saw a dip in their rate, from 9.1% at its peak to 2.5% for the same period.
Key interest rates: Since June 2024, the Bank of Canada has lowered its key interest rate by 0.25% on three occasions, causing it to decrease from 5.0% to 4.25%.
In the U.S., it was somewhat surprising that the Fed (U.S. Federal Reserve) brought its key interest rate down by 0.50% in September. The combination of a major decrease and rising unemployment led to this decision. Further decreases are expected, although the Fed will surely 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 1.5%, compared with 4.6% in the summer of 2022. If a recession were to happen in Canada, it would likely be weaker given the strong Canadian population growth (immigration), which helps stimulate the economy. What’s more, the rate-cutting cycle may probably help the Canadian economy.
We’ve also witnessed a slowing of the American economy, even if many investors believe that a recession will be avoided. That’s why the rate-cutting cycle started in Canada after a three-month delay.
MARKETS
Equity: The economic conditions described above led to very positive results.
The all-country equity index recorded a return of 5.3% (in Canadian dollars). In contrast with the first two quarters of 2024, where increases were overwhelmingly attributed to the artificial intelligence realm, most sectors and securities contributed positively in the third quarter.
The global small cap equity index also performed quite strongly (8.2% in Canadian dollars), as did Canada’s main index (S&P/TSX), which posted an excellent return of 10.5%.
Bonds: We saw bond yields decline dramatically, as market players predict additional easing (key rate cut) by central banks and an economic slowdown. In response, the FTSE Canadian Universe Bond Index had a very positive return of 4.5%.
OUTLOOK FOR 2024–2025
Balance: The market is predicting several more central bank cuts in 2024 and 2025, driving investors to expect 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.
