Markets Review
Our quarterly reports offer a concise market review and portfolio recommendations, reflecting our analysis of current market risks and opportunities.
Most Recent
2024 Quarter 3
Capital Markets Executive Summary
Global equity markets advanced 6.6% in Q3, bringing YTD gains to 18.8% through early October, with emerging markets leading the way. Fixed income appreciated as interest rates fell, and alternative assets like hedge funds, private equity, and private credit posted positive returns. Our report explores these trends and provides insights on portfolio positioning amid mixed economic signals and potential election-driven volatility.
Strategic Asset Allocation View (7-years)
Our 7-year forecasts consider several factors shaping the mid-term investment landscape, including mid-single-digit equity returns (6.0%-7.0%) and a gradual decline in interest rates. U.S. equities may see narrowing outperformance over international markets, while corporate profit margins face mixed pressures from onshoring and AI-driven productivity. Safe fixed income remains attractive with yields above 4%, and private market strategies offer higher return potential. Our report provides strategic insights on balancing risk and return across equities, fixed income, and alternative investments.
Macroeconomic Conditions
Global economic conditions indicate a resilient U.S. economy, though signs of a slowdown are emerging. Canada’s growth has been modest but slightly above expectations, with projections of 1.2% for 2024 and 2.0% for 2025. Europe’s economy remains sluggish, with minimal growth, while China continues to underperform relative to expectations. Our analysis addresses growth outlooks, inflation dynamics, and geopolitical influences on market stability.
Shorter-term View
Our report revisits vital issues outlined in previous updates, including moderating inflation, slowing economic growth, and AI’s role in market performance. We also address China’s economic outlook, evolving geopolitical risks, and the potential impacts of the upcoming U.S. presidential election, providing insights into various market scenarios and their implications.
Equity Markets
Global equities, as measured by the ACWI Index, advanced 6.6% in Q3, bringing YTD gains to 18.8% through October 11. Gains were broad-based, with emerging markets (+8.7%) and international developed equities (+7.3%) outperforming U.S. stocks (+5.8%). Emerging markets were notably boosted by a sharp 23.9% rally in Chinese equities, driven by large-scale government stimulus announcements. Strong corporate earnings and better-than-expected inflation data further supported equity markets throughout Q3, with momentum continuing into early October.
Fixed Income Markets
U.S. government and investment-grade corporate bonds saw significant appreciation in Q3, as interest rates declined. The Barclays US Aggregate Index rose 5.2% for the quarter, leading to a 3.0% YTD gain. U.S. Treasury yields dropped by 60 basis points (10-year) and 110 basis points (2-year) in Q3, reflecting favorable inflation trends toward the Fed’s 2.0% target and a faster-than-expected cooling in the labor market. However, bond yields have risen by 35 basis points since the quarter’s end, amid stronger-than-expected economic data.
Alternatives & Private Investments
Hedge funds saw gains in Q3, led by long-short equity and convertible arbitrage, while commercial real estate struggled with declining values for six straight quarters, despite some stabilization signs. Private equity deal activity rebounded sharply, though exit volumes lagged behind peak years. Venture capital performance remains uneven, with AI startups still attracting investment, but overall exit activity remains subdued.
Actionable Investment Opportunities
Investment opportunities include adding duration to fixed-income holdings and exploring private equity and credit strategies. Our report highlights the potential for bond price appreciation and attractive returns from private credit, providing guidance on optimizing portfolio allocations in the current market.
