Checking in on our 2024 market predictions
As we celebrated Canada Day this past week, the first half of 2024 is officially in the books.
Being that it was a bit of a slow week in the markets due to Canada Day here and Independence Day in the U.S., we decided that this would be our opportunity to check in with some of our 2024 predictions we made six months ago.
Asset performance highlights for 2024
Here’s how some major assets have performed so far this year (all in Canadian dollars).
- Canadian stocks up 6.4%
- U.S. stocks up 20%
- International stocks up 9.1%
- Canadian bonds (as measured by the ZAG ETF) down 1.78%
- Gold up 24.7%
Prediction: Canada’s TSX 60 will gain 15%, outperforming the 8% gain for the S&P 500
So far, this forecast isn’t going so great. I think there’s still a solid chance the TSX60 will hit 15% by year end, and that the U.S. stock market will unlikely keep up its incredible rate of return it had so far in 2024. However, I don’t think we’ll see the U.S. market pull back to just an 8% gain for the whole year. The biggest U.S. stocks continue to roll along and drag the U.S. market average upwards despite negative small-cap returns.
Prediction: Tech stocks will underperform the TSX Composite
This prediction was even worse than the first one! If we use the Nasdaq 100 as our measuring stick for U.S. tech stocks, then its 21.4% return dwarfs the 6.6% return of the TSX Composite Index. We continue to think U.S. tech valuations will sink back to Earth—but it might be later when this happens, not sooner.
We think this margin will close a bit by the end of 2024, but there are definitely animal spirits at play right now when it comes to the meteoric growth of Nvidia and other AI stocks. Consequently, it’s tough to tell just how high they will go. Going forward, lower interest rates should help big Canadian companies like banks, telecoms, and utilities.
What are animal spirits?
Animal spirits is a term used by economist John Maynard Keynes to explain irrational behaviour by investors. Traditional economics views people as rational beings who act logically based on facts. In real life, however, investors often act on emotions, rumours or gut instinct.
Read the full definition in the MoneySense Glossary: What are animal spirits?
Prediction: Canadian GDP per capita would continue to go down
Sadly, this remains quite accurate. While the Canadian economy grew about 1% so far in 2024, it doesn’t really tell the story of how average Canadians are feeling about their finances. Considering how many new residents Canada is welcoming, our GDP should be growing at a substantially faster rate. Our GDP per capita is in the negative territory, with some economists calling it a recession. When you consider that Canada’s GDP per capita is down 3% since 2022, and that GDP per capita when adjusted for inflation is down to 2013 levels, maybe Canadian politicians will get serious about increasing productivity. With Canada’s unemployment rate ticking up to 6.1% from 5.7% at the start of the year, there will continue to be a low ceiling on GDP growth in the short term.
What is GDP?
Gross domestic product (GDP) is a statistic economists use to measure the total amount of goods and services produced in a country during a specific time period, usually a quarter or a year. This number is calculated in one of three ways.
Read the full definition in the MoneySense Glossary: What is GDP?
Prediction: Oil prices will stay below USD$85 per barrel
This one is mostly right. Oil prices did climb above the USD$85-per-barrel mark briefly in April, but it’s below USD$85 at the moment, and it’s only been able to maintain that strength due to supply cuts from OPEC.
You can read about Canadian energy companies in my article on high-yield Canadian stocks at MillionDollarJourney.com.
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