Market Outlook - September 2024

The increased price target for the S&P 500 from 5,600 to 6,100 indicates our positive outlook overall and while we acknowledge that the markets are a bit stretched, we also admit we underestimated the momentum in the equity markets this year. On the one hand we’re enjoying the strength in the equity markets and reveling in the boost to bonds in the wake of central bank rate cuts, but on the other hand we want to be prudent and use caution where necessary. When it comes to the economy and the stock market, clearly investors are becoming more convinced in a soft-landing scenario and the data appears to be supporting this thesis. At the same time geo-political events and rhetoric from politicians in general is creating anxiety amongst investors.

 

While we don’t want to ignore this reality, it is also difficult to comment. We turn to Brian Belski’s recent remarks on BNN where he addressed the question, should investors be worried about the stock market right now? To paraphrase his response, “there’s always something to worry about, however when it comes to politics, don’t give politicians any credit. The stock market and the economy are what matters. Policy is policy and we don’t know what its going to be.” In other words, the stock market is up for a reason and that’s simply because the market and economy is doing well.

 

We continue to be positive on North America and expect the markets to be higher by the end of the year. Statistically, when we have this kind of strength for the first nine months of the year, the last quarter tends to be quite strong too. From a momentum perspective, there’s still a lot of cash on the sidelines which means there’s a chance for more rotation and with interest rates on the decline, GICs are becoming less attractive. All these factors are a tailwind for the equity markets.

 

In the same TV spot Belski also commented on earnings growth and with confidence he added, “our call since Oct 2022…we’re heading into a period of normalization, where earnings growth will (broader long-term trend) settle in-between 10-15% normally, with compound annual growth rates for the stock market of 10-15%, and interest rates somewhere between 3-4%. Revisions for the other 490 stocks on the S&P 500 are showing acceleration in the U.S. which is very positive for the duration and consistency of earnings growth in the U.S. and more cyclical growth in Canada that is beginning to accelerate into 2025.”

 

To receive a full copy of our September 2024 market commentary, please email us at msbwealth@nbpcd.com