By Canada Life | Feb. 1, 2024
On Jan 10, Dan Gremonprez, National Vice-President of Wealth Distribution at Canada Life, hosted a jam-packed in-depth discussion about the 2024 Market Outlook1. He was joined by industry experts Susan Spence, Vice-President and Portfolio Manager at Portfolio Solutions Group and Jared Franz, Economist at Capital Group.
What can we expect in 2024? Resilience, cautious optimism and strategic diversification are the watchwords for navigating the changing market dynamics. Read on for key takeaways from the discussion you can use to help your clients navigate today’s market uncertainty.
Are we seeing the end to high inflation?
Seemingly never-ending high inflation has been top-of-mind for investors with many now asking the question 'are we there yet?'. The speakers on the call assured us that the trajectory seems to be headed in the right direction. Recent reports suggest a declining trend in inflation in North America, offering further reasons for optimism. Spence advocated for a cautious approach to rate cuts and suggested reframing it as, "Normal for longer, instead of higher for longer" interest rates to address inflation stickiness.
Is there a recession on the horizon?
Compared to last year, the risk of recession in North America has significantly diminished, while Europe faces a slightly elevated risk. Spence pointed out that regardless of a hard or soft landing, 2024 will be characterized by slow growth. Franz explained the impact on markets comes not from the severity of the slowdown but from its prolonged duration. He noted, “the U.S. economy has historically avoided recession 85% of the time since post-WWII period," echoing optimistic sentiment towards growth arising from robust employment trend and consumer spending.
GDP growth navigated bumps in 2023, displaying resilience globally. Employment trends have been robust, contributing to potential wage growth and furthermore, supporting capital markets. Franz affirms, "We're going to continue to see resilience in 2024, into 2025 and 2026," painting a positive picture of the U.S. economy.
Will market volatility continue?
Market volatility will continue to persist in 2024, focusing on the normalization of interest rates. Central bankers will aim to balance managing inflation and driving economic growth. With a robust labour market and inflation closer to its target, expectations arise that rate hikes are nearing their end, historically a favorable time for bond ownership.
Both speakers anticipate a rebound in equity markets for 2024, with higher return expectations from U.S. and Emerging Markets. But sluggish growth in Europe and China and geopolitical risks could temper expectations. The key driver is corporate earnings, and diversification remains crucial for navigating the evolving market landscape.
Is active management necessary for my clients’ portfolios?
In the unpredictable financial landscape of 2024, Spence and Franz highlighted the importance of active management and diversification. As market volatility continues, actively managing investments is necessary and requires nimble responses to changing conditions. Diversification is equally important as is the need to broaden portfolios beyond concentrated industries.
In a world where geopolitical risks loom large; a well-diversified approach can mitigate potential shocks. Franz urges investors to consider allocations beyond flashy sectors, emphasizing the resilience found in more traditional materials that look to benefit from reshoring or near-shoring trends. He also stressed the importance of considering investments beyond technology, focusing on "run-of-the-mill materials and industrials." Embracing active management and diversification is akin to equipping oneself with a robust toolkit, essential for navigating the twists and turns of the financial journey ahead.
For more information, download our 2024 Market Outlook report or contact your Canada Life wealth wholesaling team.
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