Market and Investment Outlook 2024 Q4
An update by our Lead Portfolio Managers
As we enter 2025, the global economic landscape presents both opportunities and challenges. Anticipated interest rate cuts by the U.S. Federal Reserve and the Bank of Canada, alongside targeted stimulus measures in Asia, create a supportive backdrop for equities. Small-cap stocks, in particular, are well-positioned to benefit from these developments.
The global economy remains mixed, with easing monetary policies offering relief amid ongoing political and economic uncertainties. While rate cuts are expected to support growth, inflation pressures and geopolitical risks could introduce volatility. A disciplined investment approach focused on fundamentals will be critical to navigating these market complexities.
Historically, small-cap stocks have outperformed during rate-cutting cycles. As a result, we expect this trend to continue in 2025. Canadian small-cap equities are poised for strong returns, driven by favourable valuations, anticipated interest rate cuts and increased merger and acquisition activity. U.S. small caps are supported by resilient corporate fundamentals, though policy shifts under the Trump administration may contribute to short-term volatility.
In Canada, political uncertainty surrounding the upcoming federal election could lead to market volatility. However, small-cap companies with solid fundamentals are expected to perform well. In the U.S., pro-business policies such as lower taxes and deregulation may support equities, though tariffs and immigration policies could reignite inflation and disrupt the Federal Reserve’s easing plans. Careful stock selection and valuation discipline remain essential in this environment.
Asia’s markets are set to maintain upward momentum in 2025, supported by government stimulus and strengthening consumer demand. China’s targeted economic measures, including consumption vouchers and market stabilization funds, are driving a recovery in domestic spending. This shift towards higher-quality consumption offers a sustainable growth path. Asian mid-cap stocks are expected to outperform, mirroring the market dynamics seen in the 2017 rally.
We put our passion and expertise at your service.