- 'Rolling recessions' will continue to play out in economies
around the world.
- Normalized inflation and interest rates are expected in
global economies, including Canada.
- Attractive valuations and an improved earnings environment
supported by the potential of an economic recovery may lead to an
improved outlook for investors.
WINNIPEG, MB, Nov. 23,
2023 /CNW/ - According to IG Wealth Management's
("IG") 2024 Market Outlook ("the Outlook"), 2024 will be more
stable with some positive investment opportunities as the market
enters periods of normalization.
"The 'rolling recessions' currently taking place in economies
around the world, including Canada, show that while some sectors thrive,
others struggle. Despite this sector-to-sector uncertainty, at its
core, we are seeing more evidence of global economic recovery than
recession risk," said Philip
Petursson, Chief Investment Strategist, IG Wealth
Management. "Each rolling recession often paves the way for
rejuvenation as it transitions from one sector to another, or one
country to another – it's a testament to an economy's ability to
self-correct and march forward."
In its 2024 Market Outlook, IG's Investment Strategy Team
expects the following investment themes to emerge as potential
drivers for the markets in the year ahead:
'Rolling Recession' Moving
Through the Economy
As sectors experience ebbs and flows, consumers and investors
will have an opportunity to witness how markets can self-correct
and continue to move forward. The Outlook notes that some
areas, like manufacturing and global trade, are reaching a
bottoming level, but a potential recovery in 2024 is approaching.
These 'rolling recessions' are more common than nationwide
downturns and show the resilience of an economy. In these economic
phases, a disciplined, long-term investment strategy can help
promote sustainable growth. Further, the risks of a U.S. economic
recession have decreased for 2024 and a recovery appears more
likely. The Canadian economy does face greater risks of recession,
as the interest rate increases have had a more immediate impact on
the consumer. However, as Canada's
equity market is more globally oriented, the TSX should benefit
with a global economic recovery.
Normalizing Inflation and
Interest Rates Leading to Attractive Yields
According to the report, high inflation has been apparent in
major economies over the past few years, with Canada reaching peak inflation of 8.1 per cent
in July 2022. Through 2023 inflation
eased, which will continue into 2024. This inflation normalization
phase also implies the stabilizing of interest rates, with central
bank rate hikes paused for the time being. As a result of the
current and upcoming normalization period, fixed-income investors
could expect improved returns on bonds as a result of the higher
interest rates.
Attractive Valuations Looking
Positive for Equity Gains
This year did not see success across equities. The S&P 500
Index, for example, was dominated by concentrated gains in the
mega-cap 'magnificent seven'. However, the Outlook states that this
environment will set the stage for a potential broadening out of
market breadth in 2024. The prospect of an economic recovery in the
next year should lead to an improved earnings environment and this,
combined with attractive valuations and continued easing of
inflation, is likely to deliver a year of positive equity gains for
investors.
"If we allow ourselves to look more closely, we might discover
that the 'small stuff' can lead us to a better possible outcome,"
noted Mr. Petursson. "As highlighted throughout the Outlook, there
is data that suggests a positive turn for the U.S. economy.
The worst of the manufacturing and earnings recessions, inflation
and interest rates may be behind us. Equity market valuations are
attractive, and are expected to continue to be attractive, as are
bond yields."
"This leads us to a more optimistic view on the global economy
and markets as we head into 2024. There are challenges – the
Canadian economy being one of them. But largely, the data points to
a general sense of improvement. And with improvement comes
opportunity."
Read more about the IG Wealth Management's 2024 Market
Outlook here.
About IG Wealth
Management
Founded in 1926, IG Wealth Management is a national leader in
delivering personalized financial solutions to Canadians through a
network of advisors located across Canada. IG Wealth Management has $113.5 billion in assets under advisement as of
October 31, 2023, and is a member of
the IGM Financial Inc. (TSX: IGM) group of companies. IGM
Financial, together with its subsidiaries, is one of Canada's leading diversified wealth and asset
management companies with approximately $250
billion in total assets under management and advisement as
of October 31, 2023.
This commentary may contain forward-looking information which
reflect our or third-party current expectations or forecasts of
future events. Forward-looking information is inherently subject
to, among other things, risks, uncertainties and assumptions that
could cause actual results to differ materially from those
expressed herein. These risks, uncertainties and assumptions
include, without limitation, general economic, political and market
factors, interest and foreign exchange rates, the volatility of
equity and capital markets, business competition, technological
change, changes in government regulations, changes in tax laws,
unexpected judicial or regulatory proceedings and catastrophic
events. Please consider these and other factors carefully and not
place undue reliance on forward-looking information. The
forward-looking information contained herein is current only as of
10/31/2023. There should be no expectation that such information
will in all circumstances be updated, supplemented or revised
whether as a result of new information, changing circumstances,
future events or otherwise.
SOURCE IG Wealth Management