Economies have demonstrated resilience in the face of restrictive monetary conditions and inflation has now cooled sufficiently to prompt central-bank rate cuts. The global economy has managed to 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.
While our outlook is relatively benign, downside risks highlight why a “hard landing” remains possible. High interest rates continue to weigh on economic activity and there is a chance that inflation remains stuck at elevated levels. Geopolitical risks are also higher than normal with the U.S. election, conflict in the Middle East, China-U.S. tensions and the war in Ukraine all posing sources of uncertainty for economic growth. Despite these challenges, investors have embraced a positive outlook, with stocks climbing to record levels.
The market’s strong performance over the summer months provides an interesting microcosm of how markets generally perform over time. Despite the always present list of economic, political, and company-specific worries, the market has risen steadily, with that rise being punctuated by periods of volatility, as we saw with the “Summer Swoon” over July and early August. The issues that drove that summer volatility were, just as they so often are, transitory in nature, and quickly resolved or deemed to be of no material, long-term significance.
That's why we continue to see through and past short-term volatility. This concentration allows us to keep a keen eye on the horizon and to guide our clients’ portfolios based on a proven investment philosophy that prioritizes long-term wealth building. And as markets have begun to “re-discover” the value in assets other than large technology companies, we have seen our clients benefit from this balanced and disciplined approach.
As we approach year end, we look forward to seeing you and your family to discuss your goals, and how together we can help you achieve what matters to you.
Regards,
Vijay Parmar
President, RBC PH&N Investment Counsel
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