Media Room
The week in the markets –
December 22, 2023
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A pivotal quarter: policy shifts reshaped the 2024 outlook
- Canadian and U.S. central banks boosted equity and bond markets by indicating a pause in interest-rate hikes and signalling potential cuts in 2024.
- Bond yields fell from previous highs, fuelling a bond rally and lifting stock valuations, as lower rates reduced recession risks.
- The Canadian dollar strengthened to almost US$0.75, despite weaker oil prices, boosted by a narrowing interest-rate gap with the U.S. and expectations for upcoming Fed rate cuts.
In the year’s fourth quarter, a major shift came from central banks signalling a pause in interest rate hikes. Both the Bank of Canada and the U.S. Federal Reserve (the Fed) indicated they were finished raising rates for now; markets now expect cuts at some point in 2024.
This reversal changed market expectations, and bond prices rallied as yields declined from previous highs, which was good news for the fixed income sector. Global equities also benefited, as lower rates and diminishing recession risk supported valuations. Meanwhile, commodities softened from Q3 levels.
Three factors drove the strong equity performance; central banks pausing rate hikes in North America fuelled expectations for upcoming cuts; lower bond yields lifted valuations across indices; and economic data suggested a soft landing was achievable, reducing the risk of a recession in 2024. Overall, the year finished strongly, with considerable positive momentum.
The Canadian dollar had an interesting week, rallying to almost US$0.75, despite weaker oil prices. The narrowing interest rate gap between Canada and the U.S. boosted the loonie, as U.S. interest-rate cuts got priced in. Moving forward, our models suggest the Canadian dollar will trade within a range of US$0.72-0.75 through the first quarter of 2024.
Overall, 2023 met or surpassed expectations. Central banks indicated an end to rate hikes, and inflation came down as anticipated, while the U.S. economy and market recovery exceeded forecasts. The robust end to 2023 brought optimism for the new year.
As we approach 2024, let’s take with us the valuable lessons we've learned, and look towards the future with optimism and confidence. We wish you joyful holidays filled with warmth and happiness and look forward to reconnecting with you in the first week of January.
Listen to this week’s podcast for further insights.
This week's market closing value - week ending December 22, 2023
(As of 4:00 PM ET.*)
| EQUITY INDICES | Level | Change | WTD | YTD | 1-year | 5-year |
| CAD | CAD | CAD | CAD | |||
| S&P/TSX | 20,875.57 | 364.19 | 1.78% | 7.77% | 7.89% | 8.42% |
| S&P 500 | 4,753.63 | 42.39 | -0.01% | 21.67% | 20.75% | 13.91% |
| DJIA | 37,385.83 | 80.37 | -0.68% | 10.45% | 9.91% | 10.18% |
| FTSE 100 | 7,697.51 | 121.15 | 0.91% | 6.28% | 5.72% | 2.35% |
| CAC 40 | 7,568.82 | -28.09 | -0.19% | 17.75% | 17.13% | 8.76% |
| DAX | 16,706.18 | -45.26 | -0.09% | 20.85% | 21.11% | 8.20% |
| Nikkei | 33,169.05 | 198.50 | -0.44% | 14.69% | 12.94% | 4.60% |
| Hang Seng | 16,340.41 | -451.78 | -3.64% | -19.18% | -19.51% | -9.11% |
| CURRENCY RETURNS | CAD | Change | WTD | YTD | 1-year | 5-year |
| US$ | 1.3259 | -0.0120 | -0.90% | -2.07% | -2.91% | -0.51% |
| Euro | 1.4600 | 0.0026 | 0.18% | 0.72% | 0.87% | -1.15% |
| Yen | 0.0093 | -0.0001 | -1.03% | -9.77% | -9.74% | -5.31% |
| CANADIAN TREASURIES | Yield | Change | COMMODITIES | USD | Change |
|---|---|---|---|---|---|
| 3-month | 5.02 | 0.06 | Oil | $73.60 | $2.00 |
| 5-year | 3.29 | 0.05 | Gold | $2,053.44 | $35.23 |
| 10-year | 3.19 | 0.07 | Natural Gas | $2.61 | $0.14 |
| CANADIAN PRIME RATE |
|---|
| 7.20% |
*The data contained in the charts above is provided by Bloomberg as of 4:00 PM ET. Please note that the final closing market values may vary due to data delays and market settlement.
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