https://www.cwbwealth.com/en/news-and-stories/insights/points-in-time-q4-2024
In this commentary:
Why so glum? | Canada | U.S. | International | Fixed Income
Scott Blair, CFA
Chief Investment Officer
2024 was a great year for investors. Bonds produced solid returns and global stock markets were on fire. Yet, on a recent speaking tour, I found investors much more anxious than satisfied. What three topics were people most concerned about? The Canadian economy, tariffs, and how to navigate the markets in 2025.
Reviving the Canadian economy
Over the past decade, Canada has been the second-best performing economy in the G7 (real GDP growth to the end of 2023). Although that sounds positive, Canadians sure aren’t feeling it.
In diving deeper, we see that GDP growth across developed countries has been lower since the Great Recession. And while it’s an important indicator of the overall health of the economy, employment and affordability are much more important to Canadians on a personal level.
Elevated levels of immigration, inflation and higher interest rates have contributed to higher food prices, exploding rents and a lack of housing affordability—amongst other things—making Canadians feel worse off today. Some of these factors are now reversing. For instance, inflation is seemingly under control and interest rates are slated to fall another 0.75% in 2025 to 2.5% for the Bank of Canada (BoC) policy rate.
2025 will be a critical year for our country. With Trudeau having stepped down as Prime Minister, an early election is likely and will shift economic outcomes. Lower tax rates and less regulation would boost our competitiveness while deficit control is also sorely needed.
Potential impact of president-elect Trump
Canada resolving its political situation couldn’t come quick enough, as inauguration day in the U.S. is just around the corner and brings with it a new set of challenges. Whether you love or loathe Trump, one thing is for sure: Make America Great Again does not include Canada (or any other country for that matter). While social media speculation about Greenland, the Panama Canal, and Canada becoming the 51st state might grab headlines and penetrate the algorithm, Trump’s threats of 25% tariffs on all trade from Canada and Mexico are far more concerning.
The potential economic impact has been widely discussed, but the bottom line is that such tariffs could push us into a deep recession, weaken our dollar, and increase inflation. This would also hurt the U.S. economy though, making the policy less likely, but it remains a real possibility.
Perhaps the bigger issue here is the potentially destabilizing impact of increasingly wild social media posts about tariffs on North American economies. Investors like certainty and stability. Would high tariffs entice companies to invest in the U.S.? Only if they were seen as permanent. The risk of building a factory that’s only competitive with high tariffs could be a tough pill to swallow should a new administration reverse these policies.
Navigating the uncertainty
Currently, economists are forecasting “more of the same” in 2025. For Canada, that means inflation near the BoC target rate of 2%, unemployment rising slightly and GDP growth a little below 2%, while market strategists are generally bullish calling for strong returns in 2025 across most developed markets (including Canada and the U.S.). These forecasts seem to totally discount the tariff threat, which could dramatically change the outlook and, not surprisingly, many investors in Canada have gravitated towards worst-case scenarios.Unfortunately, there’s no silver bullet in investing. As with most things in life, there are tradeoffs. There’s a myriad of potential outcomes to our current economic malaise and U.S. threats. For instance, the risk of being in the market if significant tariffs are enacted seems obvious and negative, but there’s also risk of being out of the market if tariffs are not enacted.
The situation could also resolve itself in ways we haven’t even thought about, as happened during the early days of the pandemic. When the market fell rapidly and it appeared obvious that more pain was to come, the market rebounded rapidly and dramatically in short order.
We know that markets rise over time despite the inevitable bumps. What seems obvious at the time often turns out to be incorrect. Who would have thought in 1999 at the height of the dotcom bubble that the Canadian market would have outperformed the U.S. so dramatically over the next decade? Similarly, it seemed implausible during the depths of the credit crisis in 2009 that the U.S. market would rebound and outperform the rest of the world for so long. Surprisingly, over the past 24 years investing $100 in the U.S. and Canadian stock markets produced very similar returns (see figure 1).
Figure 1: U.S. & CAD stock markets produce similar returns over 24 years

The ripple effects of recent events can understandably stir feelings of unease. As investors, we can plan for different scenarios and adjust as the risk/reward changes. Buying strong companies and diversifying across markets remains key to success. While we can’t control global issues, we can control how we respond. Guided by deep understanding of market dynamics and long-term thinking, we have the foresight to prepare for the unexpected. And we take measured adjustments using a disciplined strategy to help protect and grow your wealth over time.
Sources: FactSet, Bloomberg
Canada
Gil Lamothe, CFAHead of Canadian Equities, Senior Portfolio Manager
Watching
2024 was a strong year for Canadian equities. Our market, as measured by the S&P 500/TSX Composite Index, was up an impressive 21.6%. Virtually all market sectors were up on the year, with technology and financials leading the pack with returns of 38.0% and 30.1% respectively.The materials and energy sectors were also strong, being up 21.4% and 23.0% respectively. The only down sector in the year was communications, coming in at -21.1%. Key drivers for these returns were strong energy and gold prices, combined with the easing of interest rates from the Bank of Canada (BoC). Interestingly, the Canadian technology sector was not driven by the promise of artificial intelligence (AI), but by excellent earnings results from businesses that continued to show strong growth and execution. Among these were Shopify (+48.3%), Constellation Software (+35.5%) and Descartes Systems (+46.8%).
Thinking
Throughout the year, we’ve reported on challenges facing our communications holdings such as being debt heavy and lacking avenues for growth. With a federal commitment to reduced immigration in Canada, this key driver to their success over the last decade is fading. As the telcos improve their networks, more services and bandwidth are offered at discounts to woo customers from competitors. While this is good news for consumers, companies aren’t generating expected returns on their investments, much of which is borrowed money. Lower interest rates will help their cause, but there’s fundamental weakness in the sector over the medium term.Late in the year, our market was roiled by the threat of tariffs on all trade with the U.S. A significant portion of our GDP is tied to U.S. exports, so whether real or not, it must be taken seriously (see figure 2).
Figure 2: Trade with U.S. is key to Canada’s economy

Source: Trading Economics (2023 statistics)
Our portfolio’s more exposed companies are largely transportation related. Railroad and trucking industries could see volumes decrease as Canadian manufactured goods become less competitive, thus reducing demand for them from our largest trading partner. In the 4th quarter of 2024, CN Rail and CPKC shares were down 7.3% and 9.9% respectively. Tariffs on oil and other commodities would be harmful to the cost of U.S. manufacturing and shipping. As such, we feel any tariffs imposed by the U.S. would be limited in their application.
Doing
We manage two Canadian equity strategies: one focused on dividends and a core strategy focused one on long-term capital growth.This year, two events affected dividend strategy more directly. The aforementioned weakness in communications stocks, with minimal dividend growth, was a concern. Accordingly, this quarter we reduced our exposure to that sector by decreasing weights in BCE, Telus, and Rogers. We offset this reduction with an increase in both Brookfield Renewables and Brookfield Asset Management. These stocks have performed well and continue growing their dividends.
Report of TD Bank’s money laundering was the second event. We’ve since reduced our TD Bank weight and increased that of CIBC. We’ve also increased our exposure to Element Fleet Services, a company we added to our dividend strategy during the year for its strong dividend growth.
In our core strategy we also moved exposure away from TD Bank and Telus, adding to our holdings with CIBC and Brookfield Corp. Within the technology sector, we continued increasing our Shopify position. The company is still executing very well and our confidence in management has grown. Another strong performer has been Descartes Systems. We increased our weight in Descartes while reducing that of Open Text, which struggled in 2024. We feel these portfolios are well structured going into 2025. A repeat of the spectacular returns seen in 2024 could be too much to hope for, but we know that staying in the markets ultimately produces more favourable long-term outcomes.
Q4 2024 Dividend Performance Summary
Canadian Dividend Portfolio | |
Number of companies in the equity portfolio |
31 |
Number of companies that declared an increased dividend |
26 |
% of companies that declared an increased dividend |
83.9% |
Weighted average of dividend increase |
4.52% |
Consumer Price Index increase (YoY*) |
1.90% |
Equity portfolio dividend yield** |
4.51% |
S&P/TSX dividend yield |
3.08% |
* Estimate from Statistics Canada November 30, 2024
** The dividend yield is based on the Leon Frazer Canadian Dividend Fund using the target weight for cash. Dividend performance numbers are year to date and express growth statistics only. These are not rates of return (as with the other portfolios).
Top 10 Dividend Growers | |
Brookfield Asset Management | 18.8% |
Intact Financial Corp | 10.0% |
Manulife Financial Corp | 9.6% |
CCL Industries | 9.4% |
Element Fleet Management | 8.3% |
Canadian Imperial Bank of Commerce | 7.8% |
Sun Life Financial Inc | 7.7% |
Royal Bank of Canada | 7.2% |
Telus Corp | 7.0% |
Canadian National Railway | 7.0% |
Source: CWB Wealth
U.S.
Liliana Tzvetkova, CFA
Co-Head of U.S. Equities, Senior Portfolio Manager
Saket Mundra, CFA, MBA
Co-Head of U.S. Equities, Senior Portfolio Manager
Watching
It was a fantastic year for U.S. equities. The S&P 500 Index was up 23.3%, just a notch shy of last year's 24.2% for an impressive return of 53.2% over the last two years. Factoring in the significant strength of the USD, Canadian investors saw even higher gains with returns north of 30% in CAD terms for 2024. This represents the best performance among major global markets. While our U.S. strategy achieved strong returns for the year, it lagged the S&P 500 Index.
This year, returns were outstanding—albeit not for all sectors and stocks. The worst sector, materials, ended the year in negative territory while health care, real estate, and energy posted modest gains of 2-6%. On the flipside, communication services, technology, financials and consumer discretionary soared with returns exceeding 20% in USD.
Mega-cap stocks continued to dominate, driven by the ongoing investments in AI. Standout performers included NVIDIA (+171%), Meta Platforms (+66%), Amazon (+44%), and Alphabet (+36%). These heavyweights had a disproportionate impact on the overall market performance.
Figure 3: Best and worst S&P 500 Index sector returns

Source: FactSet
On top of market fundamentals surprising to the upside, two other major factors shaped the latter half of 2024: the U.S. presidential election and the Federal Reserve's rate-cutting cycle. Financial stocks surged post-election, fueled by expectations of deregulation and a wave of mergers and acquisitions. JP Morgan, one of our largest holdings in the sector, was up 44%, while Tesla (not owned) also benefited significantly, climbing 60% post-election.
Thinking
Last year reminded us how futile short-term forecasts can be. Heading into 2024, concerns about a potential recession and election-related uncertainties loomed large. However, the U.S economy and market performance exceeded even the most optimistic expectations.As we move into 2025, cautious optimism prevails. Analysts predict robust earnings-per-share (EPS) growth, further interest rate cuts by the Federal Reserve, and continued progress in taming inflation. There’s also hope for broader market leadership, with gains extending beyond mega-cap stocks.
Yet with market returns north of 50% over the past two years and some policy-related inflation threats, we realize that the market narratives can shift quickly and often—sometimes several times a year. But most of these shifts are noisy distractions from what matters most: maintaining a long-term focus and sticking to a proven process.
Doing
During the quarter we exited our position in Dollar Tree as the probability of our investment thesis materializing declined following the CEO stepping down. Dollar Tree has been a turnaround story ever since the acquisition of Family Dollar years ago. Under the helm of ex-CEO Rick Dreiling, credited with the successful transformation of Dollar General, we believed the turnaround would be successful. Now that he’s stepping down and with progress falling short of expectations, we prefer to focus on other opportunities. We added to our existing holdings Accenture and Home Depot to take advantage of attractive pricing.We reiterate our stance on not fixating on short-term outcomes, whether strong or weak. Our focus remains on investing in high-quality companies with good growth prospects, solid management teams, healthy balance sheets, and predictable cash flows—all while trading at reasonable valuations. With this in mind, we continue to execute on our investment process and philosophy to benefit our portfolios over longer horizons.
Sources: FactSet, CWB Wealth
International
Ric Palombi, CFASenior Portfolio Manager, International Equities & Alternative Income
Watching
The New Year is often accompanied by resolutions and a chance to either reset or continue certain practices. The financial markets, it appears, are more aligned with the latter in resolving to continue affirming their loyalty to U.S. assets.
Financial news media is abuzz with headlines reinforcing U.S. “exceptionalism”. TINA (there is no alternative to U.S.), the “losing nature of the Europe trade”, and China’s economic struggles reinforce this mindset. Few analysts are ready to call an end to popular trades and most of the year-ahead outlooks are fueled by optimism around Trump’s pro business policies for Corporate America. U.S. stock outperformance is at a 75-year high versus the rest of the world, while the USD continues to set records against other currencies. However, current performance trends and related rhetoric also point to potential investor overexuberance and bubble-like characteristics in some areas of the market (evidenced by Figure 4).
According to the latest Bank of America survey, U.S. household optimism regarding U.S. stocks is at historical highs, while U.S. fund manager cash positions and exposure to EU equities is at historical lows. Put another way, investors seem to have priced in 100% of the positives of Trump policies benefiting the U.S. and 100% of the negatives for the rest of the world. And this is before his inauguration.
Figure 4: 75-year high in U.S. stock performance vs rest-of-the-world

Source: BofA Global Investment Strategy, Global Financial Data, Bloomberg
Thinking
We’ve often highlighted that the probability (and opportunity) for generating great returns is greater when markets are lopsided, and to do so, you need to think and act differently. For instance, market expectations are very pessimistic in Europe whether its consensus growth forecasts, tariffs, geopolitics, or economist surveys.Looking at the history of market cycles, we know that market trends can stick for awhile and market timing is a futile exercise. We also know that with extreme pessimism comes extreme opportunity for investors with a longer-term view. While value is attractive to us, we also consider catalysts that could help the market reconcile with our views.
Potential catalysts in Europe would include European Central Bank rate cuts, an end to the Ukraine war (easing energy price pressures) and Germany ending its debt cap for a major infrastructure spend. Regarding China, there’s skepticism whether Beijing will provide domestic consumption related stimulus despite the government actions and rhetoric so far. On New Year’s Eve, however, news sources highlighted that civil servants had received a pay rise, providing further hints that the government is prepared to introduce bolder demand-side stimulus measures.
Markets—especially those which are out of favour—usually like to wait for visibility before giving credit for catalysts, but that visibility comes at a price: a deteriorated risk-reward profile.
Doing
We continued to add to names that we view as illogically priced by the market: LANXESS (German specialty chemicals manufacturer), Remy (French Cognac producer); and Merck KGAA (leading tools provider for drugs and semiconductor manufacturing).We sold CCR SA, a leading Brazilian toll roads operator, on a deteriorating risk/reward profile. Brazil has re-entered a rate increasing cycle as the government refuses to acknowledge the country’s fiscal burden and continues to provide stimulus to a strong economy, thereby stoking inflation. CCR is rate sensitive and we see better opportunities elsewhere. We initiated ELIS SA, a leading provider of textile rental, laundry and hygiene services operating in Europe and Latin America. Finally, we reintroduced Samsung Electronics into the pool driven by an attractive risk/reward profile with valuation at 10-year lows.
Sources: Bank of America (BofA) Global Investment Strategy, Global Financial Data, Bloomberg
Fixed Income
Head of Fixed Income, Senior Portfolio Manager
Ric Palombi, CFA
Senior Portfolio Manager, International Equities & Alternative Income
Watching
We expected 2024 to be a tumultuous year and got exactly that. We anticipated inflation would quell and, to a large extent, it did. Longer term rates currently offer a reasonable premium over long term expected inflation. There was a great deal of pendulation over the year as yields varied by 100 points from top to bottom. However, on a year-over-year basis, long yields rose by only 4 basis points. Shorter-term yields showed similar volatility within the year.
Central banks were vigilant over the last two years in fighting inflation. As inflation returned to more normal levels, central banks were able to reduce the bank rate. We see the effect of this action in the movement in short yields (see figure 5). We also expected limited movement in credit spreads last year, which played out over the first three quarters of 2024. However, in the last quarter, spreads narrowed by approximately 35 basis points.
Of the various national elections held in 2024, the U.S. election in November was most notable. Undoubtably, there has been a significant shift in the political tone there. The fact that the election results were not contested could dampen some of the uncertainty in the markets.
Figure 5: Government of Canada Canadian bond yields fell as inflation levels subsided

Source: Bloomberg
Thinking
There may be room for further bank rate cuts in 2025, but there could be disagreement about the final end point. We see consensus that there will be fewer cuts in 2025. As such, we don’t anticipate much activity in the yield curve over 2025.
Narrow credit spreads in the last months of 2024 were unexpected. Typically, we would expect to see such narrowing accompany a noticeable improvement in the overall economy. Should we see a significantly improving economy, a resurgence of inflationary pressure could emerge. This could prompt a pause or even reversal of central bank rate cuts. We have not seen signs of a booming economy, and feel that a better way of interpreting the recent credit spread movement is nothing more than momentary exuberance. We would not be surprised to see this narrowing to a more normal level over the next number of months.
With a change in the U.S. government and political tone, we might expect to see increased confidence in certain quarters of the U.S. economy. The more deleterious effects of policy changes would be expected to occur later (in 2026 or 2027). This seems to support a reasonable economy in 2025. From a fixed income perspective, it suggests there should be limited movement in the yield curve. And that there should be reasonable returns for holding bonds, as well as reasonable benefits from holding credit bonds. “Reasonable” may not sound exciting, but after the last number of years, perhaps we could do with less excitement in fixed income.
We continue to watch various external factors, like ongoing geopolitical tensions and rising national debt levels throughout the developed world. These factors are well known by markets, and we continue to monitor them rather than actively position against them.
Doing
We had been holding some shorter-term bonds to capture capital gains and feel these gains have substantially been realized. There are still reasonable returns to be had in credit bonds. We expect spreads to trade in a fairly narrow range over the coming year.
Source: Bloomberg
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