Mackenzie Investments' report highlights key trends, economic forecasts, and investment opportunities for 2024
Mackenzie Investments (Mackenzie) has published its 2024 Mid-Year Market Outlook, delivering insights for financial advisors and investors regarding key trends affecting financial markets this year and providing an economic forecast for the remainder of 2024.
According to the report, global GDP growth has increased significantly in the first half of 2024, with the US leading the way. In contrast, Canada has experienced slower economic growth due to its higher sensitivity to increased interest rates.
Consequently, the Bank of Canada (BoC) is expected to lower interest rates in the latter half of 2024 to stimulate growth. The disparity in growth rates between the US and Canada may lead the BoC to implement more aggressive cuts than the US Federal Reserve.
The report also highlights the resilience of equities, which have withstood persistent inflation and rising bond yields, as the market anticipates the impact of earnings and favourable economic forecasts.
“The global GDP growth trajectory, propelled by robust US performance, underscores the resilience of the world's largest economy,” stated Lesley Marks, CIO of Equities at Mackenzie Investments.
“Looking ahead to the remainder of 2024, we expect global GDP growth to continue to hold, offering support for earnings growth and an overall positive tailwind for risk assets such as equities.”
Mackenzie identifies three key themes that will remain prominent for investors for the rest of 2024:
Corporate and Sustainable Debt Underpin Fixed Income Opportunities
Due to reduced expectations of future rate cuts, bond yields have increased this year, reversing some declines since October. Corporate credit markets have shown resilience, supported by strong fundamentals and investor demand.
Mackenzie sees real yields on high-quality corporate bonds as attractive opportunities, with an increasing availability of sustainable debt options to meet the growing need for energy transition financing and sustainable fixed income solutions.
“We've experienced shifting dynamics in fixed income in the first half of 2024,” commented Steve Locke, CIO of Fixed Income and Multi-Asset Strategies at Mackenzie Investments.
“With anticipated BoC rate cuts, investors can explore the corporate bond market for favourable yield opportunities, while sustainable debt, including green bonds, offers both environmental alignment and appealing yields.”
The Great Energy Transition is Underway
The ongoing energy transition presents investment opportunities across various asset classes and economic sectors. Global economic growth, resource scarcity, and climate change drive investments in cleaner energy, which surpassed fossil fuel investments in 2023.
Investment opportunities will continue in efficiency technologies, transportation, water, agriculture, and sustainable infrastructure.
Moreover, the AI revolution is expected to put additional strain on the already burdened global electricity system. Generative AI searches consume significantly more energy than traditional search methods, highlighting the risks associated with decades of underinvestment in power infrastructure.
“Despite temporary headwinds, the energy transition remains a compelling investment avenue, buoyed by resource scarcity and ecological constraints,” remarked Marks.
Innovation Continues to Drive Growth
Investors recognize the transformative potential of AI and continue to invest in established technology giants. However, opportunities to capitalize on AI extend beyond these major players, encompassing hardware, services, and industries that will support and advance AI development.
“AI is one of the most extraordinary growth opportunities of our generation, but investors must assess opportunities carefully and strategize effectively to take advantage of its growth potential. History has shown us that disruptive technologies can often yield both winners and losers,” concluded Marks.
