The global economy has managed to withstand higher interest rates and continue to grow, reinforcing our view that a recession can be avoided over the year ahead. We place the odds at 65% that economies manage a soft landing, with potentially two to five years of further expansion based on our business-cycle analysis. U.S. economic strength coming out of the pandemic was helped by robust consumer spending, bigger-than-expected fiscal stimulus and population growth, but now appears to be moderating while growth in other regions is accelerating.
We expect inflation to remain high in 2024 given recent upside inflation surprises, but for it to trend downward for the remainder of the year and into 2025. We expect to be well into next year before inflation falls to central bankers’ 2% targets. The ultimate trajectory to lower interest rates will be paced by incoming economic and inflation data and, in our view, the rate-cutting cycle should be more gradual than past periods of easing in the absence of an imminent recession catalyst.
Markets have clearly left behind the last vestiges of the 2022-23 bear market, as indices continue to achieve new highs. Our consistent investment approach, combined with a keen focus on embracing evolving opportunities, is once again proving to be the most successful way to preserve and grow wealth for our clients over time. Your patience and discipline, and your trust in us as the stewards of your wealth and expert guides along your financial journey, are once again yielding long-term results.
But challenges remain, and new ones are emerging. Geopolitical risks have risen sharply over the last few years. Inflation, while down sharply, continues to demand the vigilance of central bankers. That’s why our focus on what we can manage and control together through the expertise that your Investment Counsellor can deliver and access is so important to helping you achieve what matters in your life.
I am delighted to extend a warm welcome to our new clients from the former HSBC Private Investment Counsel, and we hope all of our valued clients enjoy a happy and healthy summer ahead.
Sincerely,
Vijay Parmar
President,
RBC PH&N Investment Counsel
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