Will the U.S. equity market continue its upward momentum in the second half of 2024? What about the Canadian market? And are bonds still attractive? Mark Bayko, head of RBC’s Portfolio Advisory Group in Canada, shares key takeaways for investors from the Global Insight Midyear Outlook.
Find more midyear market perspectives here, including a special report on U.S. debt—and why it matters to Canadian investors.
Read the full Global Insight Midyear Outlook.
Mark Bayko:
We’re at the midway point of 2024 and it’s been a reasonable year so far for investors. Global equities are mostly higher and fixed income has eked out some gains. So, what’s on tap for the second half of the year? Our Midyear Outlook provides some good insight.
First, let’s focus on the U.S. equity market.
In the near term, the U.S. equity market may continue its upward momentum thanks to the growing conviction that the U.S. is heading for a soft landing. That would allow the U.S. Federal Reserve to start cutting interest rates.
But, there are a few things that warrant some caution, including higher valuations and the risk of recession.
The price-to-earnings multiple has moved up considerably, particularly for large cap technology stocks.
And while the U.S. market is near a high, the risks of a U.S. recession remain higher than normal according to the metrics we track. It doesn’t mean a recession is imminent or even certain, but it does suggest we need to be mindful of the higher risks.
Next, we turn to the Canadian equity market.
Our stock market hasn’t fared too badly this year, but our economy is feeling the effects of higher interest rates. A combination of slower activity, a weaker job market, and ongoing disinflation helped pave the way for the Bank of Canada to cut interest rates recently. We expect a few more cuts for the remainder of the year. This should provide some relief to consumers, but we continue to expect the economic environment to remain challenging.
Now, let’s talk briefly about bonds.
Bond yields have remained somewhat volatile this year as investors try to gauge the diverging prospects for inflation, growth and rate cuts. Looking at the bigger picture, absolute yields remain well above average levels of the past 20 years. As a result, we continue to believe bonds still present investors with reasonably more attractive sources of potential return than they did just a few years ago.
For more insights, please check out the Global Insight Midyear Outlook from RBC Wealth Management. And look for our special report on U.S. debt and why it matters to investors, including those in Canada.
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