The outlook for the economy and the markets is finally starting to turn positive, with central banks holding rates for now, but expected to start cutting in 2024.

According to CIBC World Markets Inc.’s economic outlook, even though 2024 is looking like it will have a weak start due to still-high inflation rates, slowing economic growth, and tightening conditions – it should finish strong, with inflation receding and interest rates coming down, laying the groundwork for a strong 2025.

“As they say, all’s well that ends well, and we expect to close the final chapter on 2024 with the economy offering a much sunnier note for investors in both equities and fixed income assets,” the report said.

We could see The Bank of Canada (BOC) start cutting rates as early as June and realize a total of 150 basis point cuts by the end of 2024. The BOC is expected to start cutting rates before the U.S. Federal Reserve Board. These cuts should ignite economic growth by the end of the year. Furthermore, as the markets look ahead to 2025 with lower policy rates and better earnings potential; the outlook for both stocks and bonds will be quite favorable.

Though there are some risks to this outlook, CIBC said that they are largely mitigated by having a well-diversified portfolio consisting of both equities and bonds. “For instance, while a “harder landing” for economic growth would hurt stocks, this would likely prompt more aggressive rate cuts, boosting returns on bonds.” – 2024 to come in like a lion, go out like a lamb Written by James Langton. On the contrary, if rate cuts are slower or smaller than expected, bond returns may suffer. “But corporate earnings should give a lift to equities, and shorter-dated bonds will provide a decent running yield”.

The report concluded by saying “Barring much more troubling geopolitics, all’s well that ends well should apply to diversified portfolios, even if the start of 2024 remains challenging for investors.”

Finally, we are starting to see the beginnings of the next economic cycle. If you have any questions or concerns about your portfolio, please don’t hesitate to contact us.

Have a great weekend,

Tracey and Paige

Original Article: https://www.investmentexecutive.com/news/research-and-markets/2024-to-come-in-like-a-lion-go-out-like-a-lamb/ 

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