The year 2024 was a remarkable period for equity investors, with exciting technological advancements, welcomed interest rate cuts, and resilient consumer spending. As we look back, several key trends and events stand out that shaped the global investment environment.

Canada Struggles While the U.S. Powers Ahead

In Canada, manufacturing and services remained sluggish, and small business insolvencies jumped 41.7% over the 12 months ending in October. ^* This signals persistent financial pressures that could further weigh on the economy.

In contrast, the U.S. economy experienced steady growth. Consumer spending and new technologies have bolstered productivity and economic activity south of the border.

Gains for Both Stocks and Bonds

Global stock markets had another strong year in 2024, building on the recovery and growth seen in 2023. The S&P 500 Index, S&P/TSX Composite Index, and MSCI World Index returned 23.3%, 18.0%, and 17.0%, respectively, supported by resilient corporate earnings and consumer demand. ^**

Bond markets also gained, as interest rates fell and bond prices rose. Canadian and U.S. bonds, as measured by the FTSE Canada Universe Bond Index and Bloomberg U.S. Aggregate Bond Index, returned 4.2% and 1.3%, respectively, in 2024. ^‡

It has been a bumpy couple of weeks for US stocks, where we have seen four out of the last five weeks post a negative return as investors reassess stock prices given the Federal Reserve has said they may ease up on the pace of interest rate cuts.

Amid this uncertainty, the US job market showed remarkable strength. December added an impressive 256,000 new jobs, exceeding economists' expectations by about 100,000. This capped off a solid year for employment, with an average of 186,000 jobs added each month. Additionally, with over 8 million job openings - more than any in the last 25 years pre-pandemic - the unemployment rate edged down to 4.1% from 4.2% in November, highlighting the economy's continued resilience.

This good news can feel like bad news to the markets. The economy showing more strength means that the central bank is less likely to make more rate cuts anytime soon. This outlook for higher economic growth and accompanying long-term inflation pushed bond yields to a 14-month high and put some pressure on the stock market. While this could reduce short-term market sentiment, it also reflects confidence in the economy’s ability to withstand higher rates—a sign of resilience that bodes well for the long term.

Looking to 2025

• With earnings season kicking off, attention turns to the financial sector as they are the first bellwether results to roll in.
• Inflation will continue to be a focal point for the year, and this week’s Consumer Price Index (CPI) report will reveal whether December was another month of slightly hotter-than-expected price increases. November's results showed an increase to 2.7% from 2.6%, signaling uneven progress toward the Fed’s 2.0% target.
• In Canada, Trudeau’s resignation announcement on January 6 was not unexpected, but the decision to put Parliament on pause until March 24 left key legislation, including proposed changes to the capital-gains inclusion rate and charitable-donation deadlines, in limbo and added uncertainty for businesses and investors alike.
• Inauguration Day is just around the corner, with President-elect Trump preparing to take office on January 20. His administration has promised bold policy changes, from tariffs and immigration reforms to tax cuts and deregulation. However, markets are still waiting to see which of these priorities come first. Inflationary moves, like tariffs, could create short-term disruptions, but pro-growth policies, such as tax cuts, might offer a more balanced outcome.
• These political transitions, paired with evolving economic data and central bank decisions, add complexity to the market narrative. However, it’s worth remembering that markets are ultimately driven by fundamentals, not just headlines. News that creates uncertainty adds to volatility, but once there is a clear outlook for the path ahead, markets digest the news quickly.
• The reason we are optimistic, along with most analysts, is because the foundations of economic growth remain strong. A resilient labour market supports spending, S&P 500 earnings are set to grow by double digits in 2025, and central banks are expected to continue easing rates, albeit more gradually. While there may be bumps along the way, these elements provide a solid base for navigating what lies ahead.

Staying Focused On What Matters

Uncertainty is always a factor in investing, but history shows that focusing on well-run companies and sticking to a plan can deliver favourable results over the long term.

If you have any questions about the markets or your investments or want to talk about the year ahead, we are here to help.

^*Source: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/statistics-and-research/insolvency-statistics-canada-october-2024-highlights.
^**Source: Bloomberg. As at December 31, 2024.
^‡Source: Bloomberg. As at December 31, 2024.

This e-newsletter has been prepared by Christine LaLiberte and expresses the opinions of the author and not necessarily those of Raymond James Ltd. (RJL). Statistics, factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities.

This newsletter is intended for distribution only in those jurisdictions where RJL and the author are registered. This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same privacy policy which Raymond James Ltd adheres to. Securities-related products and services are offered through Raymond James Ltd., member-Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member-Canadian Investor Protection Fund.