Market Highlights

The third quarter of 2024 was eventful as global interest rate cuts dominated headlines and volatility picked up ahead of the election. Despite huge swings during the quarter, the equity markets ended higher; the S&P 500 (in CAD) gained +4.43%, and the S&P/TSX Composite gained +10.54%. In addition, the Canadian Universe Bond Index rose +4.66% during the quarter as interest rates fell.

Major Themes and Events in Q3 2024

• Major central banks cut key policy interest rates: Canadian and European central banks continued cutting their interest rates as inflation eased, with Canada’s target rate now sitting at 4.25% and Europe’s deposit facility rate sitting at 3.5%. In the US, the US Federal Reserve made its first interest rate cut in September at 0.50%, with a target of 4.75%-5.00% for their federal funds rate.
• Rise in volatility: During the quarter, public equity markets saw large volatility swings, with levels not seen since the pandemic, as an unexpected interest rate increase in Japan caught market participants off guard. In addition, equity markets have historically been more volatile during the months immediately ahead of the presidential election. Despite the volatility, the S&P 500 held key technical levels, as buyers continue to step in and “buy the dips.”
• Market breadth improved: For Q3 2024, we saw some profit-taking from the mega cap tech companies with proceeds rotating into other sectors, improving market breadth. This helped stocks at home, with the S&P/TSX Composite outperforming the S&P 500 as financials and commodity miners outperformed the information technology sector.
• China tries to save its struggling economy: In Asia, China’s property sector continues to be a main concern; thus, the Chinese central bank announced its biggest stimulus package since the pandemic to try and stabilize its economy and provide a boost to future growth.

Looking Ahead

All eyes are on the US Presidential Election next week. A common question we receive from clients is “How will the election affect my portfolio?”. US domiciled or denominated investments are the most relevant when contemplating any impact to investors. As Canadians, our client’s US exposure tends to sit well below 50% of their portfolio, so any immediate impact is limited to this level. As for impact on this 50% (or less), it is interesting to note that the last 4 inauguration years {2009, 2013, 2017, 2021) have all seen the S&P500 grow by over 20%. More than anything markets do not like uncertainty, whether at the presidential level or in the legislative branches. Uncertainty in terms of who will govern can lead to near term volatility. The outcome, however, has very limited influence on market performance during inauguration years or presidential terms (see chart below).

There is no discernable pattern in S&P 500 growth in Republican vs Democratic presidencies (see chart below). So, determining whether impact will be positive or negative often has less to do with who wins an election and more to do with getting past the election itself.

Have a great weekend.

-The Gilman Deters Team

I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc. “

This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity. As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. Laws and regulations are continually changing, and their application and impact can vary widely based on the specific facts involved and will vary based on the particular situation of an individual or entity. Prior to making any decision or taking any action, you should consult with a professional advisor. The information is provided with the understanding that Harbourfront Wealth Management is not herein engaged in rendering legal, accounting, tax or other professional advice. While we have made every attempt to ensure the information contained in this document is reliable, Harbourfront Wealth Management is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is, “with no guarantee of completeness, accuracy, timeliness or as to the outcome to be obtained from the use of this information, and is without warranty of any kind, express or implied. The opinions expressed herein do not necessarily reflect those of Harbourfront Wealth Management Inc. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are not to be construed as a solicitation or offer to buy or sell any securities mentioned herein. Harbourfront or any of its connected or related parties may act as financial advisor or fiscal agent for certain companies mentioned herein and may receive remuneration for its services. The comments and information pertaining to any investment products (The Portfolios) sponsored by Willoughby Asset Management are not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units of The Portfolios is made pursuant to the Offering Memorandum or Simplified Prospectus and only to investors in Canadian jurisdictions. Important information about The Portfolios is contained in the Offering Memorandum or Simplified Prospectus available through Willoughby Asset Management. Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with investments in The Portfolios. Investments in The Portfolios are not guaranteed, their values change frequently, and past performance may not be repeated Historical annual compounded total returns including changes in unit value and reinvestment of all distributions do not take into account sales, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Unit values and investment returns will fluctuate and there is no assurance that The Portfolios can maintain a specific net asset value. Harbourfront Wealth Management Inc. (“Harbourfront”) has relationships with related and /or connected issuers, which may include the securities or funds discussed in this commentary and are disclosed in our Statement of Policies Regarding Related and Connected Issuers. This policy is included in your new client package, on our website, or can be obtained from your investment advisor on request.