- Global economic growth and central bank interest rate cuts expected to continue in 2025
- The higher yields offered by fixed income create attractive investment opportunities. Within equities, the earnings outlook is attractive, but valuation requires a selective approach
- As a result of the new U.S. administration, expect policy shifts in trade, taxation and regulations to add to volatility
WINNIPEG, MB, Dec. 3, 2024 /CNW/ - According to IG Wealth Management's ("IG") 2025 Market Outlook ("the Outlook"), Canadians can expect a market environment with stabilized inflation and interest rates, lower recession risk and a general easing of monetary policy in the year ahead. This, in turn, is expected to contribute to a favorable backdrop for investment opportunities after a year of economic normalization in 2024.
"The markets have rebounded strongly over the past two years, returning to a pre-2008 'old normal' economy with stable inflation and interest rates moving forward," said Philip Petursson, Chief Investment Strategist, IG Wealth Management. "We're seeing more evidence of inflation stabilizing closer to the 100-year average of three per cent and with this view we expect the Bank of Canada and U.S. Federal Reserve benchmark policy rates to average 50-100 basis points above inflation."
In its Outlook, IG's Investment Strategy Team expects the following investment themes to emerge in 2025:
Differing Growth Rates Among Global Economies and Central Bank Balancing Acts
Looking ahead to 2025, IG believes the global economy is moving in the right direction. However, the pace of growth will vary by country and region. While the fundamentals of the U.S. economy remain stable, Canada and Europe may face challenges maintaining economic stability throughout 2025. Further, and not surprisingly, if China's economy, which has generally been sluggish the last few years, sees success, it will positively impact global markets. The Outlook also notes that growth rates will largely depend on central bank policies, with continued interest rate cuts expected in 2025 as banks balance growth, unemployment and price stability.
Attractive Fixed Income Opportunities and Earnings Growth Potential
The tilting of interest rates is expected to create an attractive fixed income environment for investors in 2025. IG forecasts that short-term interest rates will likely continue to fall, but that long-term interest rates are projected to remain steady, creating mid-single digit expectations for fixed income returns, along with down-side protection against economic risks in the coming years. Throughout 2023 and 2024, markets saw two strong years of equity returns. IG anticipates that this growth will continue into next year, with earnings-focused investors likely to see improved performance in individual stocks, compared to investments in broad-based indicators like the S&P 500 Index.
Post-Election Policy Shifts
The Outlook expects that the results of the 2024 U.S. presidential election will bring new policy changes that may impact markets as the country takes a more "protectionist" approach. These policy shifts in areas such as trade, taxation and regulation can bring opportunities - but also uncertainty and risk. For example, continued federal deficit spending and additional tariffs are likely to add inflationary pressure. As the landscape evolves, staying focused and strategically invested will be key to navigating what's ahead.
"As highlighted throughout our Outlook, investors can head into 2025 with a certain degree of optimism. Given the economic, fixed income and equity backdrop for the year ahead, our focus remains on quality and tactical asset selection, particularly as equity valuations realign and fixed income once again offers competitive yields. Maintaining balance across asset classes, geographies, styles and size will remain crucial," concluded Mr. Petursson.
Read the full IG Wealth Management 2025 Market Outlook on the IG website:
https://www.ig.ca/en/insights/2025-market-outlook
About IG Wealth Management
Founded in 1926, IG Wealth Management ("IG") is a Canadian leader in delivering financial planning with approximately $136.6 billion in assets under advisement as of October 31, 2024. For more than 95 years, IG has been focused on improving the financial well-being of Canadians so they can confidently embrace all of life's possibilities. Through a network of advisors located across the country, IG provides approximately one million clients with personalized advice, comprehensive financial planning, insurance and mortgage services and professionally managed investment solutions. IG is a member of IGM Financial Inc. (TSX: IGM), part of the Power Corporation group of companies and one of Canada's leading diversified wealth and asset management organizations with approximately $264 billion in total assets under management and advisement as of October 31, 2024. For more information, visit ig.ca
This commentary may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of 11/28/2024. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
SOURCE IG Wealth Management
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