IG Wealth Management 2024 Market Outlook: A Degree of Economic Normalization Expected in the Year Ahead

  • ‘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 – November 23, 2023 – 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. 

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