Global Asset Allocation Team Market Update – September 2024

The MSCI All Country World (+2.4%) hit a fresh record in August. The S&P 500 rose 2.3%, while the S&P/TSX advanced 1.0% as underperformance in the heavyweight resources space offset healthy results in the financials sector following a solid reporting season from the big banks. The MSCI EAFE jumped 3.0%, while the MSCI gauge of emerging market stocks gained 1.4%.

Fixed income markets also extended their winning streak as investors grew more confident in the case for lower rates as cooling price pressures provided the Federal Reserve the scope to join its developed market central bank peers in the easing cycle this fall. Traders are anticipating about 100 basis points of rate cuts by the end of the year, which implies an unusually large half-point reduction at one of the three remaining meetings left in 2024. The yield curve steepened in a bullish manner, with policy-sensitive short-term yields declining by more than their longer-dated peers. Notably, the 2-year treasury yield declined by 34 basis points to 3.92%, while the 10-year treasury yield fell by 13 basis points to 3.90%. The Bloomberg US Aggregate Bond Index added 1.4%, while the FTSE Canada Bond Universe gained 0.3%.

The US dollar (DXY) edged lower (-2.3%) in its worst monthly performance this year as wagers for Federal Reserve rate cuts intensified. The greenback was weaker versus its major peers, with the Canadian dollar (+2.4%), euro (+2.0%), pound (+2.1%), and yen (+2.6%) all appreciating last month.

Finally, commodity markets ended August on the back foot. Both crude oil and copper retreated on the back of a deteriorating demand outlook in top consumer China. The lingering threat of OPEC+ restoring some supply in the fourth quarter was also hanging over the oil market last month. By contrast, gold advanced to a new record high as declining treasury yields and a weaker US dollar boosted the appeal of the non-interest-bearing precious metal.

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