More important than politics are the secular trends that we see driving markets over a three- to five-year time horizon. Healthcare companies, which are typically in the crosshairs of political machinations, have had little to say thus far. Potential candidates are not campaigning on drug pricing or “Medicare for All” as in prior cycles. This muting of political risks further supports our favorable outlook on this versatile sector ― one with defensive characteristics as well as attractive growth prospects amid increasingly brisk innovation, such as the GLP-1 “diabesity” drugs.

1. Small-cap stocks sold off harder and faster during the early stages of the pandemic as investors feared smaller companies would not have the wherewithal to survive.
2. The data represented the first monthly expansion in manufacturing since 2022.
3. While the rate of economic growth may slow, we expect that, in a more normalized economic environment, the prior fears about small-cap solvency should alleviate.
4. We see particular opportunity among makers of the technology components that go into both EVs and advanced driver-assisted systems for all vehicles regardless of powertrain.

And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data. The number of Americans aged 65 and older will increase 30% from 2025 to 2050, according to projections from the U.S. Data from the Centers for Medicare & Medicaid Services shows per-person healthcare spending among those 65 and older was over $22,000 in 2020, more than double the $9,000 annual spend of oanda review working-age Americans. The US economy added 303,000 jobs in March, ahead of economist estimates of 212,000, helping push the unemployment rate down to 3.8%. Secondary sanctions are discouraging Chinese banks from working with Moscow, placing pressure on one Russian bank to facilitate trade, Reuters says. “The Bank of Canada overnight lending rate is at five per cent and rates most certainly won’t rise to another five per cent per cent this year,” he said.

Betting on soft landing in Canada. Expect upside for the TSX in 2024: strategist

As far as investors are concerned about market volatility, geopolitical and economic uncertainty, and rising interest rates, they will likely continue to seek relative safety in value stocks. It’s been a tough year for stock prices across the board in 2022, but rising rates have been particularly hard on growth stocks. In fact, the Vanguard Growth ETF (VUG) has significantly underperformed the S&P 500, generating a -27.8% total return year to date. At the outset of the Covid-19 pandemic, the BoC slashed its key interest rate to the record low of 0.25% as what it called a “proactive measure” as the pandemic worsened and oil prices dropped significantly.

After starting the year as the most overvalued sector, energy is now one of the more undervalued sectors, following its underperformance for the year to date as oil prices have fallen. After dropping precipitously as interest rates rose, the utility sector is now undervalued. We continue to find value in the basic materials sector as the bubble in lithium prices has popped and fallen too far to the downside and gold-mining companies provide an attractive upside option. “While rate cuts from the Federal Reserve would be welcome news for stocks, they are not a requirement for a strong market. The market has been able to rally for the past 18 months even with high interest rates and we believe stock investors are adjusting to this new normal of higher interest rates,” Straub says.

Our Outlook for the U.S. Economy and Monetary Policy

While we forecast that the rate of economic growth will slow and stocks have already rallied and are nearing their highs, we still see multiple undervalued areas that provide relatively large margins of safety. While many have dubbed this the most consequential election in decades, that sentiment is not necessarily showing up in company rhetoric. So far, we see the lowest percentage of firms discussing the election versus any of the past three cycles, with less than 10% of companies citing “election” in their Q4 earnings calls. Mentions typically pick up as the year goes on, but this is the lowest starting point in recent history. One reason may be that the likely candidates, the current president and a former president, are well known entities, blunting the uncertainty factor. This year’s strong start (+7% through March 15 vs. the 0% election year average shown below) could mean an even better trajectory for stocks if past cycles are any indication.

Similarly, the term “AI winter” was coined to describe several periods since the 1970s of transient ebbs in AI interest and investment. Importantly, slowing doesn’t mean a change in the long-run direction of travel, and that can create investment opportunity. Overall, we place measured emphasis on the short-term political landscape in shaping our portfolios for long-term performance.

The Bank of Canada’s War on Inflation

Apple is under growing pressure to find new revenue sources after it scrapped its electric vehicle project in February. Many Canadian banks posted weaker-than-expected earnings in the fourth quarter. While pressures are expected to continue in the quarters ahead, Harris said investors and analysts have now baked that into their expectations. Analysts project full-year S&P 500 earnings growth of 11.0% in 2024, but analysts are more optimistic about some market sectors than others.

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After keeping the rate at 0.25% for two years, the BoC raised it to 0.50% amid high inflation at 6.7% and an increasingly volatile global economy due to Russia’s invasion of activtrades forex broker review Ukraine. The next month, the BoC raises its key interest rate by half a percent to 1%. The last time they raised the overnight target rate by this much was in March 2000.

The technology, consumer cyclical and consumer defensive sectors led the market gains in the first quarter, each generating total returns of around 8% or more. The stock market rally has been broad-based, with only the real estate sector finishing the quarter in the red. Make no mistake, there have been casualties in the wake of lexatrade review the BoC’s aggressive approach. Higher interest rates are increasing the likelihood of an economic slowdown or even a moderate recession at the beginning of 2023. During times of economic uncertainty like this, investors tend to sell stocks and other risk assets, compressing stock earnings multiples and weighing on share prices.

The S&P 500 posted a total return of 3.2% in March, propelled by relatively positive economic data. It is now ahead 10.6% year-to-date in 2024 as concerns over a U.S. economic recession have subsided and investors have shifted their attention to the timing of a Federal Reserve pivot from monetary policy tightening to policy easing. There’s also a negative impact on discounted cash flow valuations, which can hurt high-growth stocks. They increase the cost of capital, which discourages companies from borrowing and investing to expand their businesses.