Dear Friends,

I hope you had a great weekend.

Well, although it’s not quite official, my Miami Dolphins almost certainly laid to rest any hopes of making the play-offs this year with their loss yesterday. Congratulations to all the Bills fans on another big win. It is sure looking like your man Josh Allen is the front runner for MVP this year. The Bills hit a huge milestone yesterday becoming the 5th team in history to score 30+ points in 8 straight games. I also happened to see another interesting fact to go along with this. Each of those teams had one of their players named MVP, and each of those teams did NOT win the Super Bowl…

On a more serious note. Please say a prayer for Miami wide receiver Grant DuBose who was taken off the field on a stretcher yesterday after a very hard hit to the head. Initial reports say that he is in stable condition. We hope and pray for him to have a full recovery.

A continued decline in inflationary pressures, combined with ongoing signs of a cooling Canadian economy, recently prompted the Bank of Canada (BoC) to cut interest rates for the fifth consecutive time. In the U.S., the Federal Reserve is also expected to cut rates when it next meets, though investors have tempered their expectations for how far the Fed will go amid resilient economic data. Below, we briefly review 2024 and look ahead to 2025.

This year, while not yet complete, has been another strong one for equity markets. Global stocks are up over 20% so far, led by North American equities. International and emerging markets have also seen above-average returns, though these have been less pronounced. Market gains were led by the artificial intelligence theme, as investors anticipate a potential step change in future productivity and growth. The U.S. mega-cap “tech” stocks – commonly referred to as the “Magnificent 7” – have been the most direct beneficiaries, accounting for roughly half of U.S. equity market returns this year.

In Canada, the technology sector has similarly had strong performance. The gold sector was another standout as emerging market central banks continued to purchase gold to diversify their reserves, driving the commodity to new highs. Notably, the financial sector contributed the most to the Canadian stock market’s strong returns. While performance varied, sometimes widely, across individual banks, the group as a whole performed well as recession fears eased and businesses and households demonstrated greater resilience under the weight of high interest rates.

This year marked a shift in central bank policy, with many cutting interest rates. That has fueled some hope of a better economic and earnings story in 2025 and has led to a broadening in the group of stocks and sectors participating in the market rally. Meanwhile, the bond market experienced less volatility, with yields fluctuating within a narrow range as investors gained confidence in the outlook for inflation and growth. This stability led to solid returns across both government and corporate bonds.

Looking ahead to 2025, we want to highlight our firm’s Global Insight 2025 Outlook. In it, our firm’s investment team is mindful that valuations – particularly in the U.S. equity market – are relatively high following another year of strong performance. Yet, valuations are supported by healthy earnings growth and solid economic projections for both 2025 and 2026. Moreover, a more supportive policy backdrop could allow valuations to move higher still. In Canada, earnings growth is similarly expected to support a more reasonably valued stock market, though some uncertainty tied to the impact of tariffs remains. For bonds, opportunities appear less compelling than they were a year ago, given lower yields and narrower credit spreads. As a result, investors may need to adopt a more selective approach.

Overall, we are pleased with the contributions that both stock and bond markets have made to our client portfolios this year. And while we see reasons to be optimistic about the year ahead, we are mindful that investor sentiment has become more positive and stock prices already reflect the expectation of higher growth next year. That has left markets a bit more vulnerable should economic and earnings developments fall short of expectations. We echo the sentiment expressed in our firm’s outlook: “watchful, cautious, but invested”.

We extend our warmest wishes to you and your loved ones this holiday season and look forward to supporting you in the year ahead.

Should you have any questions, please feel free to reach out.

Best Regards,

Frank