Third Quarter
Driven by easing inflation and resilient economic growth, global benchmarks, apart from Nikkei in Japan, continued their ascent in the third quarter and returns are strong so far in 2024. While the first half of 2024 saw investors push markets higher on AI themes, the market broadened in the third quarter and stocks outside of the AI theme also moved higher. In the last three months, the Canadian S&P/TSX index rose 9.7%, hitting an all-time high in September. In the U.S., the Dow was up 8.2%, while the S&P 500 gained 5.5% in local currency. The tech-heavy NASDAQ lagged other North American indices, increasing only 2.6%. In Europe, the London FTSE remained essentially flat, up 0.9%, while the German DAX climbed 6.0%.
The Model Portfolio ended the third quarter up 4.5%, bringing its 2024 year-to-date gain to 10.3%. Equity markets shifted focus during the quarter, with gains moving away from the high-flying tech and energy sectors to more interest-rate-sensitive sectors. While most of our equity holdings did very well, we were absent in the materials and real estate sectors, which were some of the strongest performers. On the fixed income side, the Bank of Canada (BoC) has now reduced the lending rate by 25 basis points (bps) for three consecutive meetings and helped drive bond prices higher.
Looking ahead to the fourth quarter, we remain optimistic about equity markets, despite a few headwinds that may cause temporary setbacks. As inflation numbers approach the target range of 2% to 3%, central banks globally now have a clear path to easing monetary policy and increasing the likelihood of avoiding a recession, which should be supportive to both bond and equity markets.
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Investment Checklist
1. Make 2024 RRSP contribution as soon as funds are available. The maximum is 18% of 2023’s earned income to a maximum of $31,560.
2. Make 2024 $7,000 TFSA contribution as soon as funds are available. The maximum if you have never contributed is $95,000.
3. Make $2,500 annual RESP contribution per child to benefit from the 30% combined government grants.
4. Take advantage of the new FHSA if you are looking to buy a house for the first time in the future
5. Review asset allocation to make sure it is in line with current objectives and risk tolerance and inform us of any special income need for this year.
The calculation of performance data set forth herein has been prepared by the author as of the date hereof and is subject to change without notice. The author makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and contain information and opinions, which are accurate and complete. However, BMO Nesbitt Burns Inc. ("BMO NBI”) makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on this report or its contents. Information may be available to BMO NBI or its affiliates that is not reflected herein. This report is prepared solely for information purposes. Please note that past performance is not necessarily an indicator of future performance. The indicated rates of return are gross of fees or commissions. Individual results of clients' portfolios may differ from that of the model portfolio as fees may differ, and performance of specific accounts is based on specific account investiture. The noted model portfolio portfolio may not be appropriate for all investors
11 Sources: Bank of Canada, Bloomberg, BMO Capital Markets