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The U.S. election was the defining event of the quarter, with Donald Trump decisively defeating Kamala Harris to reclaim the presidency. His return to office sparked a post-election rally, as investors anticipated pro-business policies, including potential tax cuts and deregulation. This optimistic sentiment pushed North American equity markets higher, while international markets struggled under the weight of geopolitical tensions and slower growth.
Central banks also played a critical role in shaping the quarter. The U.S. Federal Reserve and the Bank of Canada continued cutting interest rates, marking a clear shift from inflation-focused policies to supporting economic growth and labour market stability. The Bank of Canada was particularly aggressive, implementing two 50-basis-point (half-a-percentage-point) cuts, bringing rates to their lowest levels in over two years. These actions contributed to improved sentiment across equity markets, though bond markets saw a mixed performance.
The quarter nevertheless had its challenges. Political risks rose in the wake of the election, with renewed trade tensions as president-elect Trump signalled a tougher stance on tariffs, particularly targeting Canada, Mexico and China. Globally, concerns over slowing growth in China and prolonged geopolitical conflicts (including those in Eastern Europe) weighed on sentiment.
Looking ahead to 2025, we remain optimistic. Inflation is no longer a primary concern, allowing central banks to maintain accommodative policies. While political risks persist, the global economic backdrop appears supportive, and corporate earnings are expected to improve. Historically strong fourth-quarter performances in economically sensitive sectors, such as consumer discretionary and financials, highlighted the strong foundation heading into the new year.
With diversified portfolios, investors are well-positioned to capture potential opportunities in both equity and fixed income markets in the year ahead. Find out more in our 2024 Fourth Quarter Market Review.
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