Bill’s Blog | December 5, 2024
As 2024 comes to a close, it is vital to evaluate what has transpired in the world, the markets, and our personal lives. What worked for you in your life, or what failed in 2024? It is ok to experience successes and failures as long as we learn the lessons on our life journey. No one does life perfectly (especially me!), so it is best to reflect, journal, make course adjustments, seek out help and try your best to make better decisions. At least, that is the way I see it. So without getting too philosophical, let’s look at the markets as we end 2024 and the Other-Big-Stuff that will most likely impact us in 2025.
Equity markets
Level YTD 1 Yr
S&P/TSX Composite Index C$ 25,648.00 22.38% 26.74%
MSCI USA Index US$ 5,770.65 26.77% 32.57%
MSCI EAFE Index US$ 2,315.77 3.56% 8.98%
MSCI Emerging Markets Index US$ 1,078.57 5.36% 9.27%
MSCI Europe Index US$ 2,053.91 1.66% 6.67%
MSCI AC Asia Pacific Index US$ 183.42 8.28% 13.06%
Fixed income market Level YTD 1 Yr
FTSE Canada Universe Bond Index C$1,177.01 4.95% 8.55%
FTSE World Investment Grade Bond Index US$216.73 0.69% 4.92%
Currencies Level YTD 1 Yr
CAD/USD 0.7140 -5.44% -3.17%
Commodities Level YTD 1 Yr
West Texas Intermediate (US$/bbl) 68.00 -5.09% -10.48%
Gold (US$/oz) 2,643.15 28.12% 29.79%
Silver (US$/oz) 30.6 28.70% 21.18%
Market performance – as of November 29, 2024
I want to thank Canada Life for this data feed!
So, what does it all mean? North American markets have outperformed significantly again in 2024 compared to Eastern Block economies. The major indexes have all hit record highs in 2024! The economy (There is a disconnect between the stock market and the economy) has deeply struggled in Canada (less so in the USA) due to anti-business policies and over-regulations from Ottawa for the last 9 years. To put the Canadian economy in perspective, we have had the worst capital inflows in Canada since the great depression of the 1930s! Canada is in recession, with rising bankrupcies in real-estate development (a large part of the Canadian GDP), debt delinquencies on the rise, growing unemployment and ongoing wage increases (which is highly inflationary). Canadians and the government (Federal, and provincial) are highly indebted, and this will further complicate the growing challenges for individuals and politicians in 2025.
The Canadian dollar has significantly declined against the US dollar, and I foresee this trend to continue in 2025. Travel to the USA will become more difficult due to the huge dollar value discrepancy, so staying homebound or other options may be preferable.
Oil and natural gas prices have dropped, which has helped Canadian consumers and businesses. Inflation is still sticky, and what is hurting many Canadians is housing costs (ownership or rent) up 30 to 50% since 2020, especially in major cities. Housing prices are just too expensive! Food costs continue to rise and are up 35% since 2020. Both of these issues are at crisis levels, but the current government does not seem to care or have any solutions. Expect 2025 to continue to be challenging due to these serious issues for many Canadian families and individuals. We have record foodbank participation of over 2 million Canadians due to the inflation crisis, growing unemployment and a slowing economy!
Other bright spots for savvy investors have been gold and silver in 2024 as we end the year with 30% gains in both precious and monetary metals—returns not seen since the 1970s. Central banks in the East (Russia, China, India, Turkey, Poland, and many others) have continued to purchase record tonnage of Gold in the last few years. Why? In 2019, gold was reclassified as a tier-one asset equal to a US treasury note. Since then, central banks have massively accumulated gold to strengthen their balance sheets and diversify away from US treasuries/currencies. Gold is superior as it has no counterparty risks, while debt products have real risks. Secondly, currencies are rapidly being devalued globally.
Physical silver is being purchased by China and India at record levels for their industrial uses, and its monetary value. Secondly, the demand for silver has increased dramatically, while mines cannot meet this demand. There have been 100 to 200 million ounces of shortfall each year for the last few years. Both gold and silver outperform in uncertainty (wars, economic turmoil, devaluing of currencies and loss of purchasing power and we are experiencing all these crises in spades!) Expect both metals to shine in 2025 once again. There will be corrections if Mr. Trump can stop the two great wars (which would be awesome), and this will be a great time to purchase more on pull-backs. At least, that is what I will be doing. I see gold pushing through $3000 an oz and silver $40 plus in 2025.
The other asset class that has done the best in 2024 is Bitcoin and select Altcoins (over 40% returns). Bitcoin blasted through $100,000 US per coin last night. Amazing! Why? Well, some of the largest financial firms in the world have launched Bitcoin and Ethereum EFTs, and more ETFs are planned and institutional demand has driven several of these speculative assets to record levels. Second, five countries have decided to have Bitcoin as a reserve asset (USA, UK, China, El Salvador and Ukraine). I expect great volatility to continue in 2025 and significant gains for those brave enough to participate in the 15-year-old asset class. Remember, develop a plan to take profits and please do not leverage if you choose to speculate in these high-risk/high-reward assets. I am not making a recommendation but providing educational insights.
Finally, the long end of the bond market (10-plus years) has gotten a bid. The yield curve inversion that has gone on for several years (a strong signal of coming recession) is starting to normalize. Long-term bond yields have risen as central banks have aggressively lowered rates. Lowing of interest rates does not always equal significant lowing of mortgage rates. If the bond market sniffs higher risk in the debt markets, the long end of the bond market can dramatically increase (meaning higher mortgage rates).
So in summary, the North American stock markets have had another exceptional year, despite growing real economic issues. But, what is very concerning is we have had a 15-year bull market without any meaningful full correction (excluding the very short-term Covid crash). The stock markets in the US and Canada are at all-time highs and record evaluations. Once again, I see this as a serious issue over the next year or two. We are overdue for a large market event similar to 2000 or 2008 or worse! Short-term, the markets still seem to want to go up.
I encourage you to be well-diversified in multiple asset classes, be defensive and consider hedging your stock portfolio as you see risks rise. Real estate in many markets in Canada needs to have a sizable correction (it is unaffordable), but who knows when this will happen. I suspect over the next two to three years. As always, reduce your debt levels or eliminate them. Develop a solid savings strategy, and practise paying cash for your goals and dreams, rather than adding debt.
Geopolitical risks are on the rise. 56 wars are currently underway, which is the highest number since WW2. Over 90 countries are participating in the conflicts in one way or another. Let us all pray the hatred and wars will diminish in 2025.
So, in conclusion, what is the one thing you need to improve in 2025 regarding your overall wealth plan? Evaluate what is working, be honest about what is not and make changes. If you have never taken my online Wealth Foundations course, I recommend you do so. It is 100% Free, and you can complete it in about two hours. The course covers the foundation principles you will need to build wealth over your lifetime. You can find the link on my website.
I hope you have a wonderful Christmas and holiday break with family and friends.
All the best till next year!
Bill Westmacott is a life insurance broker in BC and wealth solutions provider.