February 15, 2024

Quarterly Newsletter - Winter 2024

2024 economic outlook

After two years of successive rate hikes, with central banks looking to balance growth and inflation, the time may (finally) be right for a rate cut! This is great news for anyone planning to renew their mortgage—and businesses should get a boost as well.

We expect the global economy to drag a little in the first months of 2024, bringing inflation down gradually and paving the way for interest rate cuts later in the year. Of course, we can't say exactly when this will happen. That all depends on inflation, which has been slow to reach its target.

Canada

One year ago, most economists predicted that Canada would be hit by a recession in 2023, but the economy has proven surprisingly resilient. Does that mean we'll see a recession in 2024? Maybe, but the economic slowdown shouldn't be too severe in Canada, as the GDP remains in positive territory for now. We've been hearing about an anticipated recession for several years now. If Canada's economy does enter that portion of the economic cycle, the low jobless rate and labour shortage should help limit the damage. We expect the Bank of Canada to start lowering rates in summer 2024.

United States

South of the border, we can expect a soft landing and a gradual rate reduction in the fall, with the US economy outperforming Canada's. Last November, some forecasts called for up to seven rate cuts in the United States, starting in March 2024. But inflation ticked up in January according to the latest data, cooling investor enthusiasm, and the 2% target is as elusive as ever. We'll also need to keep an eye on the 2024 US elections. Will the Democrats continue to govern the country, or will the Republicans take power? Only one thing is certain: With Trump in the mix, it's going to be a wild ride.

Possible scenarios for 2024

Let's look at the odds according to our investment strategist, Michel Doucet:

Some people are saying an "apocalypse" is nigh: Why? Other people are talking about a fourth industrial revolution: What's that? The journey might be more interesting than the destination, when we talk about the economy—but you can leave the research to me! Here are my conclusions about different scenarios that may occur:

• "There could be an economic apocalypse" ... But when? Who knows! Probability in 2024: 1%.
• "The S&P 500 could plummet 35% after a major upheaval" ... But that's just the average correction we've seen since the 1950s. Probability in 2024: 10%.
• "The S&P 500 could grow 9% in 2024" ... The average performance observed after the index reached a record high in 1968. Probability in 2024: 40%.
• "The S&P 500 could grow 20% in 2024" ... A performance we've witnessed in 1985, 1995 and 1998. Probability in 2024: 15%

So, who's going to be right? The optimists or the pessimists? Either way, it's better to stay invested and have more cash ready to invest if the markets dip. Here's to a prosperous 2024!