Market Outlook - December 2024

Despite broad economic and market concerns in Canada, the TSX managed to post a solid return over 18% in 2024. While the start of the year was particularly soft, due to concerns around the economy and interest rates, the conditions shifted rather quickly once the Bank of Canada began to cut rates in June of last year. What transpired in the second half was a broad-based rally, with all sectors, except for Communication Services, posting positive returns. Overall, the surprising momentum that occurred in 2024 was driven entirely by valuation reversion, as valuations rebounded back above the long-term average. In the U.S. we saw a much different picture with valuations undeniably extended, but when you look under the hood it looks much more reasonable for the “average stock”. In our outlook for 2025 we continue to recommend an overweight position in Technology, given its extremely strong performance over the past two years, and we anticipate outperformance from the Consumer Discretionary sector as revision trends suggest a turnaround for Discretionary stocks. With this positive view for both major North American indices, our 2025 base case scenario price target forecast for the S&P 500 is 6,700 and the TSX is 28,500. This represents a 10% return from current levels, and it is worth noting that should any positive developments occur in the coming months from politicians with respects to growth policies on either side of the border, a more bullish case scenario could certainly be made. Stay Tuned.