Market Outlook - March 2024

From our perspective there is a case for reasonably well-grounded optimism. Our 2024 outlook proposed at the beginning of the year suggested a soft landing and eventual rate cuts by both the Fed and BoC. What we didn’t comment on was the proliferation of artificial intelligence and its’ potential to drive productivity gains sharply higher. At first, we thought this new phenomenon was years away, and that might still be true, but there are some early signs of the positive impact to bottom line performance for some companies; something we’re watching closely and diligently researching to understand the full potential.

Throughout this recovery the labour market has remained healthy, but stickier inflation combined with strong job growth has pushed market expectations for a Fed rate cut out a little further and the call for fewer rather than more cuts are now the consensus. Whereas in Canada, although things are improving and the latest economic data has surprised to the upside, the expectation for cuts beginning in June remains unchanged. Despite all the mixed data the stock market has been quite resilient in 2024 and out of this enthusiasm we see two primary reasons for the resilience to continue. One of those reasons being AI and it’s potential to generate strong productivity gains. This is much like the market optimism experience of the mid-90’s, where the productivity gains from the computer and internet rollout helped create one of the greatest bull markets in history. Secondly, it is textbook behaviour for corporate spending to pick up over the next few quarters. With the concern of recession behind us and the anticipation of rate cuts on the horizon, this gives corporations more confidence to refocus on growth and expansion.

As for our outlook this year, nothing has changed in our view, although we keep an eye out for circumstances that could either curb or improve it. Maintaining a balanced approach between equity and bonds, large cap and small cap, growth and value, US and CAD holdings will ensure that we participate in the upward momentum while protecting our gains from any potential threat that could cause short term disruptions.

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