The first quarter of 2024 got the year off to a strong start with the S&P 500 (in CAD) and S&P/TSX Composite gaining 13.34% and 6.62%, respectively. Ql 2024 saw financial markets navigate through a landscape marked by escalating geopolitical tensions and evolving central bank policies that continue to focus on inflation. Inflation reports remained persistently higher than expected, contributing to fluctuations in bond yields and currency markets; the Canadian Universe Bond Index fell 1.22% during the quarter and the US Dollar depreciated by 2.25% against the Canadian Dollar.

Major Themes and Events in Ql 2024:

• Geopolitical Uncertainties & Inflationary Pressures: Geopolitical tensions continue to rise, with conflicts in Eastern Europe and the Middle East contributing to noise as equity markets seemingly have shrugged them off. However, the impacts are felt in the commodity markets, particularly in oil, where prices of crude rose 16.08% in the first quarter. In addition, the US 10-year Treasury rate has moved higher along with oil prices as the impact on the gas pump continues to be felt.
• The US Federal Reserve and the Bank of Canada held interest rates steady: Equity markets rallied this quarter with no action from major central banks; the BOC and US FED maintained interest rates, while both central banks are expected to cut interest rates later this year.
• Japan raised its interest rate for the first time in 17 years: As a result of persistent inflation in Japan, its central bank decided to increase interest rates, resulting in the entire world finally all back in positive interest rate territory.
• Technology stocks showing some divergence: Last year, all the Magnificent 7 tech leaders (NVIDIA, Meta, Tesla, Apple, Amazon, Netflix, and Google) led the market in the first quarter of 2023. This year, the technology stocks have been divergent, with Apple and Tesla both posting negative returns in Ql 2024 due to regulatory headwinds and growth fears.

Economic Indicators
Major central bankers continue to monitor employment and inflation reports to gauge when they can lower interest rates. In the USA and Canada, inflation has fallen from its high, however in the USA employment reports remain robust, and inflation appears to have bottomed during the quarter, putting central bankers in a tough position to cut rates sooner. While in Canada, GDP growth expanded in the fourth quarter more than expected, however employment conditions are showing some signs of weakening. Outside of North America, China’s recovery has been choppy as real estate concerns continue to loom.

Have a wonderful summer!

-The Gilman Deters Team

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