January 2025
Stéphane Rochon, CFA, Equity Strategist; Richard Belley, CFA, Fixed Income Analyst; Russ Visch, CMT, Technical Analyst; Eric Yoo, Associate; Ernad Sijercic, Associate
The year 2024 brought very strong performance for stock investors in the U.S., Canada, and foreign markets. We believe the market remains well supported for now. Our key conclusions are as follows:
1. As we enter 2025, we remain overweight equities with a fair value of 29,000 for the S&P/TSX and 6,500 for the S&P 500, implying a better return potential – in local currency terms – for the Canadian market despite Trump’s tariff threats which are undoubtedly a risk (more on this below). The key pillars of this positive stance are a) a low probability of recession in the next year, b) strong corporate earnings momentum (double-digit growth projected in the U.S. and Canada), c) a relatively favourable inflation and interest rate environment, and d) still reasonable valuation and dividend growth potential for a number of sectors and individual stocks (especially in Canada).
2. At the same time, investors should not underestimate the risks of a Trump-led tariff war and the high valuation for the U.S. stock market (particularly in the Tech and Communication sectors) along with the extreme concentration we are seeing with the top 10 largest U.S. companies comprising more than a third of the S&P 500’s value (a level only matched during the 1970s “nifty-fifty period”).
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Do not hesitate to give either of us a call at 416 359-7565 or 416-359-7564 or email Sharon Kubicek or Alisa Carli if you have any questions respecting your portfolio and the prevailing investment, economic and political issues at play today.