Global Asset Allocation Team Market Update – December 2024

Global equity markets ended November on solid ground, with the MSCI All Country World advancing 3.6%. The S&P 500 (+5.7%) finished the month at a fresh high – while the S&P/TSX (+6.2%) led the global charge following Shopify’s (+49%) solid earnings report. By contrast, the MSCI EAFE fell by -0.7%, while the MSCI gauge of emerging market stocks stumbled by -3.7% given a sharp (-4.5%) decline in Chinese stocks.

Fixed income markets also generated positive results – even despite expectations for higher interest rates under a Trump administration. Treasury yields declined across the curve, with the 10 year yield falling by 12 basis points to 4.17% – while the 2 year yield declined by a more modest 2 basis points to 4.15%. Similarly in Canada, the 10 year government bond yield dropped by 13 basis points to 3.09% – while the 2 year yield fell by 4 basis points to 3.04%. For the month, the Bloomberg US Aggregate Bond Index rose 1.1% – while the FTSE Canada Bond Universe advanced 1.7%.

The US dollar (+1.7%) continued to grind higher in the aftermath of the election – owing to the prospect of less rate relief from the Federal Reserve, mounting speculation that Trump’s tariff threats are real, and the growing likelihood that the growth gap between the US and other developed market economies will remain wide in 2025. The greenback was stronger versus most of its Group-of-10 peers, with the euro (-2.8%), pound (-1.3%), and Canadian dollar (-0.5%) all losing ground last month.

In commodity markets, oil (-1.8%) slipped on easing tensions in the Middle East, while the International Energy Agency said it expects a surplus next year as demand growth in China slows. Copper dropped -6.0% amid subdued demand prospects from top-consuming China – while disappointment over Beijing’s economic stimulus measures also weighed on the red metal. Finally, gold (-3.4%) was pressured lower on the back of the stronger US dollar and after Federal Reserve Chair Powell underscored resilience in the US economy that may slow the pace of rate cuts. Higher borrowing costs tend to weigh on the non-interest-bearing metal.

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