Market Update July 2024

Here is our latest market update, covering recent economic changes and forecasts.

RECENT DEVELOPMENTS IN CANADA
The past few months have seen significant economic activities in Canada. Here’s a brief overview:

Interest Rates:
The Bank of Canada and the European Central Bank both cut interest rates for the first time in early June. In Canada, the rate was reduced to 4.75%, while the ECB cut its rate to 4.25%.

Inflation:
The Consumer Price Index (CPI) increased by 0.56% in May, above the expected 0.3%. Inflation rose to 2.9%, up 0.2% from the previous month. Excluding food and energy, the CPI rose by 0.4%.

GDP:
GDP per capita fell and is expected to continue declining due to high inventories and ongoing interest payment shocks. Canada is on track to exceed the second-quarter annualized growth forecast of 1.5%, despite only 1.7% growth in the first quarter, missing the projected 2.8% growth rate.

Labour Market:
Businesses report no longer experiencing labour shortages and may now have an excess workforce relative to economic activity.

US ECONOMIC CONDITIONS
US economic conditions have shown some positive trends recently, alongside political events that could impact markets. Here are the key points:

Inflation:
US inflation met expectations, dropping to 3.42%, down 0.2% from last month.

Consumer Spending:
Marginal increases in consumer spending fuel optimism for a potential soft landing engineered by central banks, with a 66% chance of rate cuts by the Federal Reserve in September.

Market Trends:
Bonds joined stocks in their uptrend after a difficult start to the year.

FORECASTS AND PROJECTIONS
The S&P 500 is forecasted to rise an additional 10.4% during the remainder of 2024. Additionally, a continuous decrease in interest rates is expected over the next 12 months, but it will be slow and cautious to avoid triggering a sudden increase in inflation.

PORTFOLIO ADJUSTMENTS
June Review: No adjustments were made in June. Our current strategy remains sound, focusing on stability and growth.

CHANGES GOING FORWARD
We believe it is time to increase our US equity exposure, particularly in AI investing. This will be a long-term position for growth, and we will proceed with caution given the upcoming election. We are also happy with our positions in both fixed income and Canadian equities, as they provide income for either living expenses or reinvesting for growth. With interest rates continuously shifting we are going to change where we park cash in order to ensure we maximize the interest earned.  

In summary, we are pleased with how the portfolios are performing amid the continuous volatility in world politics and markets. We will continue to adjust our portfolios to manage risk, income, and growth while meeting your individual objectives, needs, and risk tolerance.

If you have any questions or need assistance, please remember we are always here for you.