In our December 2024 Market Outlook, we see the US economy continuing to outperform expectations. Q4 GDP growth is projected at 2.5% year-over-year. Consumer spending remains a key driver, supported by easing inflation and a steady labour market.
US equities remain buoyant, bolstered by strength in tech and healthcare sectors. However, ongoing concerns about elevated valuations and Federal Reserve policy could introduce volatility.
Markets anticipate the Fed maintaining its current rate of into early 2025, with a cautious pivot toward easing mid-year if inflation trends continue downward.
Canada shows signs of cautious optimism. The Bank of Canada has taken steps to reduce interest rates with several cuts this year. The BoC will likely lower the rate again before the end of the year.
Inflation now sits at the Bank’s 2% target, benefiting consumers and easing pressures on business costs.
However, GDP growth remains below potential with projections suggesting continued subdued activity. Labor markets are softening, with the unemployment rate hovering around 6.2% a marked increase from earlier lows.
President-Elect Donald Trump’s social media activity has once again contributed o market volatility following his re-election in 2024.
His posts, particularly on Truth Social have amplified market reactions to his policy announcements and statements on tariffs, deregulation, and tax reforms.
For instance, comments on potential new tariffs on Chinese, Canadian and Mexican goods have raised investor concerns about inflationary pressures and potential trade conflicts, causing fluctuations in equities, bond and currency markets.
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