Equities staged a broad-based post-election rally in November. U.S.-based stocks, as measured by the S&P 500 Index, rose 6.3% in November. All the benchmark’s underlying sectors were in the green during the month. The S&P 500 ended November at an all-time high and posted its best monthly performance of 2024 on the backdrop of Donald Trump’s sweeping victory in the US presidential election. His victory came along with expectations of further tax cuts, expansionary fiscal policy, deregulations, and the implementation of a more nationalist trade policy. Domestically exposed US small caps were seen as the main beneficiaries and gained 11% over the month. Cyclical sectors, such as consumer discretionary, rising 13.9%, financials, rising 10.8%, and industrials, rising 7.9%, outperformed. They were seen as the main beneficiaries of Trump’s proposed policies. Healthcare lagged with concerns about the new administration’s less friendly stance towards the pharma industry. The U.S. dollar appreciated 0.5% versus the Loonie.  

The S&P/TSX Composite Index closed out the month at an all-time high with a 6.2% gain. This was it’s fifth consecutive monthly gain. Eight of the underlying sectors were positive, led by a 28.2% gain for information technology. Telecommunication services was the worst-performer, with a 7.1% loss. Small-cap stocks, as measured by the S&P/TSX SmallCap Index, rose 2.5% for the month. 

International equities, measured by the FTSE Developed ex-US Index, were flat at 0.4% during the month, while emerging markets stocks shed 2.3%. The US election results were met with cautious sentiment in those regions. US dollar strength, as well as the fear of the Fed reducing it’s rate cuts specifically put pressure on broad Emerging Market equities and Chinese equities declined due to concerns about a future trade conflict and the assessment that the previously announced government support measures were not yet sufficient to overcome the domestic real estate crisis. Europe also felt negative effects from concerns on coming US trade policies, as well as lower earnings results from the automotive and consumer goods sectors. The UK outperformed due to a strong performance in the domestic financial sector. 

Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, rose 1.7% during the month, from the Canadian central bank continuing to lower rates. 

Globally, investment grade bonds were flat, the key global investment grade bond benchmark gained 0.3%. Central banks globally continued to lower rates. The Bank of England also cut its policy rate by 25 basis points to 4.75% in an 8-1 vote. However, the Bank lifted its inflation projections for 2025 and 2026 following October’s UK budget.

In the US, supported by disinflation and encouraging employment data, the Fed voted to continue towards a more neutral interest rate stance by lowering the federal funds rate by .25%, moving to the target range of 4.50%-4.75%. 

Despite the continued easing, the US bond markets were met with a negative impact from the concern that Trump’s coming policies could reignite inflation and reduce the future rate cuts of the Federal Reserve. The current expectations are there will be only three cuts in the next 12 months. This caused long term bonds in the US to underperform vs their global peers. U.S. dollar-denominated global bonds saw their biggest return contribution over the month from the appreciation of the US dollar. A solid growth outlook for corporate earnings kept US high yield spreads tight and US corporate bonds outperformed government bonds.

On the commodity front, natural gas prices surged 24.2% during the month, while the price of a barrel of crude oil fell 1.8%. Gold, silver and copper had a negative month, falling 3.4%, 6.4% and 6.0%, respectively. Precious metals saw profit taking from the large momentum they have experienced this year. Natural gas surged on supply constraints, as there was a further reduction of Russian gas deliveries to Europe and a surprising closure of a large liquid natural gas (LNG) plant in Australia.  

Economically, Inflation in Canada increased to 2.0% year-over-year in October. The acceleration was due to base-year effects on gasoline prices. The Canadian economy added 15,000 jobs in October, as the nation’s unemployment rate was unchanged at 6.5%. The Canadian economy grew by 1.0% in Q3 2024, below the Bank of Canada’s projection of 1.5%. 

U.S. nonfarm payrolls grew by 12,000 in October, maintaining the unemployment rate at 4.1%. The consumer price index rose 0.2% for the month, putting the 12-month inflation rate at 2.6%. Shelter and used cars contributed more to the monthly price increase than expected. The Federal Open Market Committee opted for a .25% cut at its November meeting, bringing the federal funds rate down to 4.50–4.75%.

Content sourced from Bloomberg, National Bank CIO office, JP Morgan, and IA Private Wealth – Monthly Market Snapshot (December 2024). 

Data to November 30, 2024, unless otherwise indicated

Table 1: Equity Index Returns (% in CAD)

Source: Bloomberg.

Table 2: Fixed-Income Returns (%)

Source: Bloomberg.

Table 3: Commodity Prices (Prices and Returns in USD)

Source: Bloomberg.

Table 4: Economic Data

Source: Bloomberg, Stats Canada.

Table 5: One-Month Sector Returns (% in CAD)

Source: Bloomberg.

Table 6: Exchange Rates

Source: Bloomberg.