Each quarter, Bâtirente’s Investment Strategy Manager, Jean-François Dumais*, shares our funds’ performance results with you and offers his comments regarding financial markets. This issue looks at the third quarter of 2024.
ECONOMY
Inflation
In Canada, inflation fell from 8.1% at its peak in the summer of 2022 to 2.0% on August 31, 2024. In the US, it fell from 9.1% at its peak to 2.5% over the same period.
Key interest rates
Since June 2024, the Bank of Canada has cut its key rate three times by 0.25%, from 5.0% to 4.25%.
In the US, the Fed (US Federal Reserve) caused something of a surprise by cutting its key rate by 0.50% in September. The significant fall in inflation combined with rising unemployment contributed to this decision. Several further cuts are expected, but the Fed will surely want to prevent inflation from rising again if they are too big and too fast.
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 occur in Canada, it would likely be mild, given the significant growth in Canada’s population (immigration), which is helping to stimulate the economy. 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. That’s why the rate-cutting cycle began with a 3-month delay with Canada.
MARKETS
Equity
The economic conditions outlined above have produced very positive results.
The All-Country Equity Index recorded a return of 5.3% (in Canadian dollars). In contrast to the first two quarters of 2024, when the artificial intelligence theme was the main driver of gains, a majority of sectors and stocks contributed positively in the third quarter.
The Global Small Cap Equity Index also performed very well (8.2% in Canadian dollars), as did Canada’s main index (S&P/TSX), which posted an excellent performance of 10.5%.
Bonds
Bond yields fell rapidly as market players anticipated further easing (lowering of key rates) by central banks and an economic slowdown. As a result, the FTSE Canada Universe Bond Index posted a very positive return of 4.5%.
2024-2025 OUTLOOK
Balance
The market is anticipating several more central bank cuts in 2024 and 2025, prompting investors to expect that the right balance will be struck between economic growth and inflation.
REPERCUSSIONS FOR BÂTIRENTE DIVERSIFIED FUNDS
In the third quarter, Bâtirente Diversified Funds posted very positive returns ranging between 5.1% and 6.3% depending on their risk profile, i.e., from least risky (more bonds) to most risky (more equities).
Bâtirente Equity Multi Funds
Canadian Equity Multi Fund: 9.6%
Global Equity Multi Fund: 5.4%
Global Small Cap Equity Multi Fund: 6.3%
Fixed Income Multi Funds
Treasury Multi Fund: 3.4%
Bond Multi Fund: 4.6%
*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.