The first quarter of 2025 saw notable shifts in global economic momentum. Escalating tariff threats and trade tensions—which have compounded even further since the end of the quarter—cloud the economic outlook globally while intensifying inflationary pressures. This creates a challenging environment for central banks tasked with managing inflation while countering slowing growth.
Global central banks continued to ease this quarter, though the pace of easing varied. Diverging policies highlighted economic disparities between nations, as growth indicators in Europe, China, and Japan softened. In December, the U.S. Federal Reserve communicated a more cautious approach to future interest rate cuts given solid economic and labor market activity while inflation concerns remained.
Read moreIn the third quarter of 2024, under the weight of previous central bank interest rate increases, global growth continued to slow. But in September, the U.S. Federal Reserve made its first interest rate cut this cycle, joining the Bank of Canada and other central banks who had already begun reducing rates due to retreating inflation. This has provided some relief for certain households and businesses who have been struggling with a higher interest rate environment. While the path of inflation and interest rates are never certain, we are now on the easing side of this cycle.
Read moreThe second quarter of 2024 saw a continuation of the key themes from the first quarter, as strength in public equity markets was led largely by artificial intelligence related companies. Even the utilities sector enjoyed an AI-related boost given expectations that more data centres should lead to increased electricity demand.
Read moreThe first quarter of 2024 saw a divergence in fortunes between equity and fixed income markets. Equities continued surging forward thanks to resilient global economic data while bonds suffered from rising yields. Strong corporate earnings, positive sentiment around the potentially transformational impact of artificial intelligence, and expectations of eventual rate cuts also provided fuel to rocket equities higher. From a regional perspective, developed markets continued to outperform their emerging market peers mainly due to continued economic challenges in China.
Read moreThe last quarter of 2023 was a stellar period for equity and bond markets with strong returns across both asset classes. Equities and bonds moved higher as bond yields decreased and market participants became increasingly optimistic about the possibility of central banks achieving a soft landing. At this point we have seen inflation wane without a significant effect on economic growth, the goldilocks scenario for markets, though the delayed effects of monetary policy may still be working their way through the economy. Central banks such as the Bank of Canada and U.S. Federal Reserve kept policy interest rates steady during the period and while it is by no means a foregone conclusion, the market is anticipating interest rate cuts in Canada and the U.S. in 2024.
Read moreAfter starting off positive, global equity markets finished the quarter in negative territory as developments in the period took some wind out of the markets’ sails. Market sentiment was impacted by the U.S. Federal Reserve indicating that interest rates may remain higher for longer, prompting a rise in bond yields across the curve. The U.S. dollar has also been strong, as the U.S. economy hasn’t witnessed the degree of weakness seen in other parts of the world. The third quarter ultimately saw the return of simultaneous declines of bonds and equities.
Read moreGlobally, equity markets continued to be resilient in the second quarter, with U.S. equites being among the stronger performers. U.S. equity strength was driven by a handful of large technology-focused companies, including some that have been in the spotlight as notable advancements in artificial intelligence dominated news headlines. Meanwhile, Chinese equities declined in the quarter as growth anticipated from the lift in COVID-19 restrictions fell short of expectations.
Read moreEquity markets were resilient in the first quarter of 2023, finishing with a strong positive return despite ongoing recession risks.
Read moreEquity markets had a positive return in the fourth quarter offering a brief reprieve from the turmoil that roiled markets in 2022—although December saw many give back some of these gains. And, after one of the worst years on record, Canadian bonds finished near flat for the quarter. In the end, 2022 goes down as a difficult year for financial markets dominated by widespread inflation, higher interest rates, geopolitical tensions, and global growth concerns.
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