There's a lot to be concerned about, but it’s not all bad for the year ahead
Economic concerns and uncertainty are set to remain factors in the global economy in 2024, but there are some reasons to be positive according to IG Wealth Management.
The $113 billion AUM Canadian wealth manager has shared its 2024 Market Outlook with Wealth Professional and, while there are some headwinds facing investors in the year ahead, chief investment strategist Philip Petursson says things are erring towards the positive.
"The 'rolling recessions' currently taking place in economies around the world, including Canada, show that while some sectors thrive, others struggle. Despite this sector-to-sector uncertainty, at its core, we are seeing more evidence of global economic recovery than recession risk," he said. "Each rolling recession often paves the way for rejuvenation as it transitions from one sector to another, or one country to another – it's a testament to an economy's ability to self-correct and march forward."
Key themes for 2024
2024 will be shaped by periods of normalization for the market and for rates and inflation, lining up some positive investment opportunities.
Several investment themes are set to emerge as potential drivers according to IG’s Investment Strategy Team.
Some sectors such as manufacturing and global trade appear to be reaching their trough, with potential recovery in the year ahead. While Canada is more at risk from recession than the U.S., the greater focus on international equities should help the TSX remain resilient even as rates continue to impact domestic growth.
Equities should see broader gains in 2024, diversifying from this year’s strong focus on mega-cap stocks. Earnings should also improve thanks to economic recovery and attractive valuations add to the positive picture.
While inflation and rate hikes are expected to ease in 2024, fixed income investors might see improved returns on bonds due to elevated interest rates.
"If we allow ourselves to look more closely, we might discover that the 'small stuff' can lead us to a better possible outcome," noted Petursson. "As highlighted throughout the Outlook, there is data that suggests a positive turn for the U.S. economy. The worst of the manufacturing and earnings recessions, inflation and interest rates may be behind us. Equity market valuations are attractive, and are expected to continue to be attractive, as are bond yields."
He added that there are still challenges for the global economy – and for the Canadian economy – but “largely, the data points to a general sense of improvement. And with improvement comes opportunity."
