Canada’s main equity market, the S&P/TSX Composite Index, delivered a relatively strong return over 2024. This came as fears of a recession eased and the Bank of Canada (BoC) undertook an aggressive path to lowering interest rates. Canadian financial markets have gone up and down over time, but have historically delivered positive returns, benefiting long-term Canadian investors.

• The S&P/TSX Composite Index posted a return of 18% in 2024. This marked its highest return since 2021, in part due to looser monetary policy and positive investor sentiment that the Canadian economy would likely avoid a hard landing. Despite the strong return, it underperformed its US counterpart, the S&P 500 Index, which returned 23% last year.
• Canadian equities saw widespread gains over the year. The information technology and financials sectors were the best performers in 2024. The communication services sector was the only sector to decline. This reinforces the importance of holding a well-diversified portfolio.
• Canadian bond prices also increased over 2024. While their average yield moved lower, pulling down the income earned from holding bonds, it was still above the levels seen prior to the pandemic.
• Inflation was a key theme coming into the year. Inflationary pressures in Canada softened over the year. The BoC lowered its benchmark overnight interest rate by a total of 175 basis points to 3.25%. More rate cuts are expected in 2025.

2024 was a positive year for Canadian financial markets. Although Canada’s economy slowed largely in response to tight financial conditions, its gross domestic product continued to expand and warded off the threat of a recession. The BoC hopes its looser monetary policy will help kickstart consumer activity, business spending and Canada’s real estate market in 2025.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.