Quarterly Update | Q4 2024

In this episode, we discuss 2024's economic landscape and what to expect in 2025, with Crista Caughlin, lead portfolio manager of the Mawer Canadian bond strategy. Crista highlights U.S. and Canadian growth trends, central bank rate adjustments, housing market dynamics, equity and fixed-income performance, and political uncertainties. She also discusses Mawer’s asset allocation strategy, balancing risks with opportunities amidst shifting fiscal policies, trade tensions, and global economic developments heading into 2025.

Key Takeaways:

• The year 2024 saw resilient U.S. growth despite headwinds, while Canada faced weaker growth and higher unemployment. Q4 showed modest improvements in Canadian growth and employment, but inflation trends potentially shifted upward in both regions late in the year.
• In 2024, the Bank of Canada aggressively eased rates, cutting 175 basis points, responding to weaker growth and target-level inflation. The Fed eased more gradually, cutting 100 basis points, as robust U.S. growth supported higher rates. Both central banks aimed to shift from restrictive to less restrictive policies.
• Political changes in Canada and the U.S. have created uncertainty for fiscal policies and trade dynamics. Tariffs pose risks to Canadian growth and inflation. Central banks remain cautious, awaiting policy clarity while navigating trade and economic interdependencies.
• The Canadian housing market faces reduced pressure due to Bank of Canada rate cuts and proactive bank measures like extended amortization. However, 2025's higher mortgage renewals at elevated rates pose ongoing risks to household spending and economic growth.
• Equity markets posted strong 2024 returns, driven by a stronger U.S. dollar, AI growth, and financial sector strength. Fixed-income returns were flat in Q4 but solid annually, with tightening spreads and rising Canadian 10-year rates prompting a defensive portfolio stance.
• The asset mix committee maintained a neutral equity stance, underweight bonds, and overweight cash in 2024, balancing hard landing concerns with market momentum. Key 2025 themes include fiscal policy uncertainty, global deficits, higher neutral rates, and opportunistic portfolio adjustments to enhance diversification.

Host: Kevin Minas, CFA, MBA, CAIA, Mawer Institutional Portfolio Manager Guest: Crista Caughlin, CFA, Mawer Portfolio Manager, Fixed Income

For more details and full transcript visit: https://mawer.com/the-art-of-boring/podcast

This episode is available for download anywhere you get your podcasts.

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Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.

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