Monthly highlights of major events which drive financial markets, along with perspectives on what they mean and why they matter.
December in review
As investors closed the book on 2024, financial markets pulled back amid persistent inflationary pressures, geopolitical uncertainties, and slowing global growth. Canadian equities fell 3.27% in December, with all sectors declining, but ended the year with a remarkable 21.65% gain—one of the best annual returns in two decades. Canadian bonds declined 0.69% in December, as investors remained concerned about inflation despite central bank action to keep it in check. Year-to-date (YTD) bond returns were solid at 4.23%, underscoring the asset class’s overall resilience. U.S. markets faced similar financial market challenges in December, with U.S. bonds declining 1.64% and equities losing 2.39%. However, the S&P 500 ended the year with an impressive 25.00% gain, marking the first instance of back-to-back annual gains exceeding 25% since 1995-96. Global equities declined 0.12% in December, however, had modest 7.97% gain YTD. Despite December’s challenges, 2024 showcased significant growth for equity markets broadly.
Here are some of December's most notable events:
Bank of Canada (BoC) delivers another bold rate cut. The BoC lowered its benchmark overnight rate by 50 basis points to 3.25% in December, aligning with expectations and placing rates in the central bank’s neutral territory. Canadian inflation eased to 1.9% in November, though core inflation remained above target, potentially limiting the pace of future rate cuts. Producer prices rose 2.2% year-over-year, driven by energy and lumber. GDP growth exceeded expectations in October, rising 0.3%, though preliminary estimates suggested a slight contraction in November. In the U.S., the Federal Reserve reduced its target range by 25 basis points to 4.25%-4.50%, its third consecutive cut, as inflation remained sticky above target.
Consumer confidence shaky despite strong retail sales, job gains. In Canada, consumer confidence fell for the sixth straight week to its lowest since May. However, retail sales rose 0.6% in October, marking a fourth consecutive monthly gain, driven by motor vehicles and electronics sales. Employment grew by 50,500 jobs in November, led by retail and food services, though the unemployment rate rose to 6.8%. In the U.S., retail sales increased 0.7% in November, supported by e-commerce and motor vehicle sales. Employment grew by 227,000 jobs, despite the unemployment rate edging up to 4.2%. Core capital goods orders, a key indicator of business investment, rose 0.7% in November, surpassing economists’ expectations of a 0.1% increase.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.32 | 4.80 | 4.80 | 185.72 |
| Canadian Bonds (FTSE Canada Universe Bond) | -0.69 | 4.23 | 4.23 | 1,168.88 |
| Canadian Equities (S&P/TSX Composite) | -3.27 | 21.65 | 21.65 | 24,727.94 |
| U.S. Bonds (Barclays U.S. Aggregated Bond, US$) | -1.64 | 1.25 | 1.25 | 2,189.03 |
| U.S. Equities (S&P 500, US$) | -2.39 | 25.00 | 25.00 | 5,881.63 |
| Global Equities (MSCI World, US$) | -2.57 | 19.22 | 19.22 | 3,707.84 |
| Emerging Marketings (MSCI Emerging Markets, US$) | -0.12 | 7.97 | 7.97 | 1,075.48 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US ($) | -2.63 | -7.93 | -7.93 | 0.6952 |
| C$/Euro (€) | -0.53 | -1.80 | -1.80 | 0.6715 |
| C$/Pound (£) | -0.89 | -6.28 | -6.28 | 0.5556 |
| C$/Yen (¥) | 2.23 | 2.84 | 2.84 | 109.341 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | -1.49 | 21.41 | 21.41 | 2,641.00 |
| Oil WTI ($/barrel) | 5.91 | 3.05 | 3.05 | 71.72 |
| Natural Gas ($/MMBtu) | 13.39 | -1.41 | -1.41 | 3.63 |
†Total Return, as at December 31, 2024. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
Trade tensions loom as U.S. tariff speculation rises. Markets grew increasingly concerned about potential trade disruptions in 2025 as President-elect Donald Trump signaled a return to protectionist policies. Speculation over new tariffs on imports raised fears of higher costs for businesses and consumers, while potentially straining relationships with key trading partners. These uncertainties left global markets on edge, with investors bracing for potential shifts in supply chains and economic growth. The anticipated tariff measures also added pressure to sectors reliant on global trade, fueling worries about disruptions to international commerce. As the new administration prepares to take office, markets remain cautious.
Did you know?
The U.S. Christmas Price Index, which tracks the cost of purchasing all the items in the classic carol "The Twelve Days of Christmas," rose by 2.8% in 2024 compared to last year. This annual index reflects shifts in consumer prices for everything from gold rings to partridges, mirroring broader inflation trends. The costliest items this year – the seven swans-a-swimming, driven by higher demand and increased feed costs.
(Source: Statista).
