The US market outperformed international developed, emerging markets, and domestic Canadian equities in 2024. This outperformance was largely driven by a resilient economy, moderating inflation, rising corporate profits, central bank easing, AI optimism, and post-election enthusiasm for Trump pro-growth policies.

The mega-cap tech stocks once again led the S&P 500 to dominate global markets as the ‘Magnificent Seven’ stocks rose 48% while the other 493 stocks rose just 10%. The index has now returned a remarkable 58% since the beginning of 2023. International and Canadian equity markets also delivered strong double-digit gains for the year.

Fixed income markets

In North American fixed income markets, both the Bank of Canada and the US Federal Reserve cut rates in 2024, albeit at different paces. The Bank of Canada reduced its policy rate by 0.25% in June 2024 and finished with 1.75% in cuts. The US Federal Reserve maintained a more restrictive stance throughout most of 2024. However, over the third quarter, signs of economic weakness emerged and moderating inflation data prompted cut rates by an outsized 50 basis points at their September policy meeting. After this cut, the pace slowed to a more normal 25 basis point cut at each of the November and December meetings, bringing total cuts to 100 basis points.

The divergence in the pace of cuts between Canada and the US led to significant outperformance by the Canadian bond market relative to the US for the year. The Canadian index was up 4.2% for the year while the US index was only up 1.3% for the year. CSSB’s custom Canadian bond index was up 3.3%.