December 2024 - Monthly Update
Kaitlyn Richardson - Dec 01, 2024
Hope this note finds you and your family well as we round out the year.
Your portfolio posted gains in November. It remains with positive performance over the last twelve months.
The private sector is the source of innovation, growth, and prosperity.
The public sector is the mechanism for distributing these advancements to the population.
In the United States (U.S.) the private sector is more likely to become a bigger share of the economy going forward and the public sector is more likely to become a smaller share of the economy. As a result, the U.S. should expect more innovation and prosperity. For investment markets, this is neutral to a net positive. It is not a negative expectation.
For the Bank of Canada, the path for overnight interest rates is now lower than it was before the election. Previously, we had expected the bank of Canada to cut overnight interest rates to just under 3% whereas now we expect overnight interest rates to be at or below 2% when this interest rate cycle is complete.
This lower and longer trend is an even more positive tailwind for bonds and bond like stocks of Canadian investment markets.
It is also likely precursor for increased activity and transactions surrounding the real estate sector in Canada. While we don't expect prices to return to their 2021 peaks, greater transactions and velocity translate to more economic activity. This will be part of the answer for how the Canadian economy gets back into growth mode in 2025.
It is now much less likely that the Canadian dollar (C$) will strengthen back to eighty cents versus the U.S. dollar. That said, the current level of seventy cents is at the weaker end of the range. We could see the C$ slowly grind a bit lower from here. We could also see a temporary spike low based on short term news and events, but much like the spike low and quick rebound of the C$ in 2015 that coincided with a sudden drop in the price of oil, we would expect the C$ to recover into the low seventies in short order. For investors and investment markets, the bulk of the C$ move lower has already occurred.
Our exports very competitive on price at seventy cents U.S.. As a result, we will continue to see American businesses look north to outsource and buy from Canadian businesses. This is a decision that will make good business sense with or without tariffs. Our export sectors will also contribute to the overall growth of the Canadian economy next year.
The investment strategy remains unchanged: Own a diversified set of high quality U.S. stocks aligned with the growth trajectory of the U.S. domestic economy and complimented with a selection of Canadian bonds and bond like stocks.
You and your wealth remain in a strong position.
The view from Brian Belski, BMO's Chief Investment Strategist:
“The S&P 500 gained… during November representing its best monthly gain of 2024… While much has been made of the magnitude of these gains and what it may mean for market performance going forward, we would point out that this performance is roughly in line with the historical average for the first two years of bull markets over the past five decades. In addition, these bull markets have lasted an average of roughly six years – indicating at least several more years of gains, in our view. Nonetheless, our analysis also shows that the third year of bull markets has also been historically the weakest in absolute terms… However, [that improves] if 1977 is excluded given that losses were triggered by the fallout from the oil embargo that year – something we view as anomalous… The S&P/TSX gained… in November outperforming the S&P 500 for the third consecutive month. In fact, the TSX has now outperformed the S&P 500 … over the last six months… While strong performance in Canadian Technology and Financials have been key to recent outperformance, most sectors have posted solid gains over the last five months as Canadian equities started to rally. Overall, this positive broad-based, low dispersion rally among TSX sectors is a positive sign that the market is beginning to see improving breadth and confidence in the fundamental backdrop of Canadian equities and remains highly supportive of our view for Canadian stocks into 2025.”
Stocks in your portfolio that made a new 52 week high this past month: Fortis*, Home Depot, MasterCard*, Royal Bank*, S&P 500 Index, United Health, Waste Management*
Stocks in your portfolio that made a new 52 week low this past month: CN Rail*, Kraft Heinz
In November, the Loonie declined by two cents versus the U.S. dollar to $0.72
We wish you and your family all our best for a healthy, happy 2025 and beyond.
Thank you,
Ian, Gab, Kaitlyn and Nataliia