Market and economic commentary
November 2024
The S&P 500 posted its best post-election day in history following Republican victory, while international markets remained fairly flat.
November started off with US stocks getting a boost from a Trump victory and Republican sweep in the US congress, with the S&P 500 posting its best post-election day in history. The momentum continued on to the rest of the market, with US small cap stocks posting double-digit gains by the end of the month in Canadian dollar terms. International markets were more or less flat on the news, while Canadian equities rallied towards the end of November. All Compass Portfolios and ATBIS Pools (the Funds)1 saw positive returns in November. Find up-to-date performance data on the ATB Investment Management website here.
Below are index total returns in Canadian dollar (CAD) terms for November and year-to-date, respectively:
Index | November 2024 | YTD |
---|---|---|
S&P/TSX Composite Index | 6.4% | 25.8% |
S&P 500 Index | 6.5% | 35.7% |
MSCI EAFE Index | 0% | 13.3% |
FTSE Canada Universe Bond Index | 1.7% | 5.0% |
Source: Bloomberg, FTSE Russell
Economics
With Donald Trump winning the presidential election and the Republicans sweeping Congress, the uncertainty has shifted from who will win to what Trump will actually accomplish. Trump has a history of making substantial demands and settling on more reasonable terms. That was on full display at the end of November when he made a post to his Truth Social platform stating that he will impose a 25% tariff on all goods imported from Canada and Mexico. While this gave political pundits and commentators much to discuss, it spurred an immediate reaction from Canadian and Mexican leaders, who sought to calm their electorates and discuss the implications of the policy directly with Trump. While it’s impossible to know what exactly he was hoping for, it’s likely that the immediate reaction to open the lines of communication was in-line with his expectations.
It’s very difficult to make the case for the blanket 25% tariff on Canadian goods entering the US. It would likely lead to prices rising across the board, especially as Canada accounts for roughly 52% of the petroleum products imported into the US. That’s just the tip of the iceberg. The auto trade between the three nations—which is significant—would be impacted, as well as agricultural and food products, just to name a few. The point is that all three nations would be impacted, and the US consumer is likely to bear the brunt of the negative outcomes. It’s also important to keep in mind that until actual policy comes out, it’s all speculation and there isn’t much that can be done proactively.
In Canada, growth was a focus for November, as Statistics Canada released its quarterly gross domestic product (GDP) estimate which showed the economy expanding at an annualized rate of 1.0%. Although the previous quarter was revised up 0.1% to 2.2%, the growth rates are still falling short of Canada’s increasing population, leading to continued declines in per capita GDP. As a result, combined with core inflation measures hovering around 2.5%, the Bank of Canada has more room to continue to cut the overnight rate at its next meeting. This is despite the fact that wage growth remains robust, as the labour market has yet to fully reverse its ongoing deterioration, even though October data wasn’t horrible.
South of the border, the US Federal Reserve continued to cut rates by lowering the target for the federal funds rate by a further 0.25% to 4.75%. The move was expected as progress has been made towards the 2% target. However, it still remains elevated and, while continuing to be resilient, the job market has shown signs of deterioration. Forward indicators, on the other hand—such as the ISM services PMI—signalled a solid expansion for the month of October, and the manufacturing PMI, while still in contraction territory (below 50) rose two points to 48.6.
Elsewhere, Eurozone inflation accelerated slightly, but to an expected 2.3% amid falling energy prices and a rising service component. The outlook for the European economy remains dependent on the outcome of the war in Ukraine, particularly with respect to the natural gas supply. A Trump victory might mean a sooner-than-later end to the conflict, which would hopefully stabilize natural gas supplies.
Markets
November started out on a very positive note for US markets as the Trump and Republican victory signalled a more business-friendly regime and fewer regulations over the next few years. The real winners were the financial sector of the S&P 500 and small-cap stocks, both of which rose over 10% in USD terms. The S&P 500 equal-weighted index outperformed its market cap-weighted peer, pointing to a continued broadening of performance—that is, the rest of the market catching up to the top contributors.
Canadian markets were right in line with their US peers, boosted by Shopify beating expectations and strong performance from financials sector. The Canadian dollar weakened slightly over the month, which boosted returns in international markets, leaving those markets more or less flat on the month in CAD terms. Strength in Asian stocks was not enough to offset weakness from European healthcare companies, leading to a negative month in USD terms.
Fixed income markets saw yields overall fall, leading to longer-duration bonds outperforming their shorter counterparts. Corporate bonds performed in line with the bond universe despite a shorter duration, likely due to spreads narrowing around 0.1%. Yields rose sharply mid-month as the federal government announced a GST holiday but then fell towards the end of November with the Q3 Canadian GDP release pointing to a continued decline in per-capita GDP growth.
Compass Portfolios Series F1 - Returns net of fees
|
November 2024 |
1 year |
3 year |
5 year |
10 year |
Compass Conservative Portfolio |
1.89% |
12.67% |
3.66% |
5.82% |
5.18% |
Compass Conservative Balanced Portfolio |
2.19% |
14.67% |
4.38% |
6.52% |
5.91% |
Compass Balanced Portfolio |
2.67% |
16.66% |
5.06% |
7.54% |
6.96% |
Compass Balanced Growth Portfolio |
3.08% |
18.05% |
5.63% |
8.19% |
7.89% |
Compass Growth Portfolio |
3.45% |
19.87% |
6.32% |
8.81% |
8.60% |
Compass Maximum Growth Portfolio |
3.86% |
22.55% |
7.36% |
9.57% |
9.20% |
Source: ATB Investment Management Inc.
ATBIS Pools Series F1 - Returns net of fees
November 2024 |
1 year |
3 year |
5 year |
Since inception* |
|
ATBIS Fixed Income Pool |
1.39% |
9.39% |
1.89% |
4.22% |
3.62% |
ATBIS Canadian Equity Pool |
5.14% |
27.85% |
10.84% |
9.73% |
7.35% |
ATBIS US Equity Pool |
6.78% |
28.92% |
10.48% |
12.96% |
12.84% |
ATBIS International Equity Pool |
1.14% |
14.71% |
3.30% |
5.58% |
6.30% |
*Inception date: September 22, 2016
Source: ATB Investment Management Inc.
1 Using F series returns
This report has been prepared by ATB Investment Management Inc. (ATBIM). ATBIM is registered as a portfolio manager across various Canadian securities commissions, with the Alberta Securities Commission (ASC) being its principal regulator. ATBIM is also registered as an investment fund manager and manages the Compass Portfolios and the ATBIS Pools. ATBIM is a wholly owned subsidiary of ATB Financial and is a licensed user of the registered trademark ATB Wealth.
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