Market and Investment Outlook 2024 Q1

As we move through 2024, the landscape appears promising yet complex for global markets. The recent moderation in inflation and the Federal Reserve’s softened stance on interest rates suggest a supportive environment for economic growth and corporate earnings. However, elevated valuations across U.S. equities and shifting investor sentiments set a high benchmark for the upcoming earnings season and the remainder of the year.

Global economic dynamics

Globally, the economic indicators present a mixed scenario. The easing of inflation and interest rates provides a conducive environment for growth, but the ramifications of prior high rates still loom, influencing consumer spending and economic momentum. This backdrop drives our cautious optimism, particularly as we gauge the potential for a sustained corporate earnings rebound amid high market valuations.

Opportune time for small-cap stocks

The current economic conditions are favourable for small-cap stocks, which typically thrive in environments of moderating inflation and lowering interest rates. Our model portfolio showcases strong fundamentals, with a projected 12%-15% earnings growth and robust financial metrics that suggest resilience and potential outperformance compared to both the Russell 2000 and S&P 500 indices.

Balancing optimism with realism in the U.S. and Canadian markets

In North America, the electoral cycles in the U.S. and economic adjustments in Canada might introduce volatility, yet historically such periods also align with strong market performances. Our strategic positioning and the robust fundamentals of our portfolios support a positive outlook, despite the prevailing uncertainties in these markets.

Navigating geopolitical tensions and emerging markets

Emerging markets, particularly in Asia, present significant opportunities despite ongoing geopolitical tensions. The disparity in valuations between emerging markets and developed markets is striking, and our focus on companies with strong management and growth potential positions us well to capitalize on these discrepancies.

Quick Takeaways

• Cautious optimism prevails with potential for economic expansion and supportive monetary policies.
• Small-cap stocks appear well-positioned for significant gains.
• Geopolitical and electoral uncertainties require vigilant management but also offer substantial opportunities for agile investors.
• Our portfolios are strategically positioned to leverage these dynamics for robust returns in 2024.