The second quarter of 2024 was marked by a dynamic economic landscape, characterized by shifting trends and notable events that influenced market performance. Inflation continued to be a focal point, with central banks globally navigating the delicate balance between controlling inflation and supporting economic growth. The US Federal Reserve's stance on interest rates was a key driver, although holding rates steady in Q2 the expectations of rate cuts by the end of the year were influencing investor sentiment.
The Bank of Canada was the first among the G7 nations to trim borrowing costs, cutting interest rates by 25 basis points in June after holding it at a more than two-decade high for about a year. This was seen as a cautious move to support economic growth amid a cooling inflation environment. Meanwhile, the European Central Bank (ECB) followed suit and cut interest rates for the first time since 2019, aligning with the Bank of Canada's decision. This move was also aimed at stimulating economic activity and managing inflation.
These rate cuts by both central banks were part of a broader trend of global central banks adjusting their monetary policies to navigate the economic challenges and uncertainties in 2024. The bond market saw increased volatility, with yields fluctuating as investors recalibrated their expectations for interest rate cuts from the Fed. The yield curve remained inverted, indicating potential economic headwinds ahead.
Currently markets are pricing in The Bank of Canada cutting rates one more time prior to the US Federal Reserve’s first expected rate cut. In total we could see 2 more rate cuts in Canada before year end.
The stock market experienced a robust performance in Q2, with major indices like the S&P 500 and the NASDAQ showing impressive gains. The technology sector, particularly companies involved in artificial intelligence, continued to outperform, driving much of the market's growth. At the end of this quarter The Steele Group hosted a discussion with Kabi Thaya, Institutional Strategist at Munro Partners based in Melbourne, Australia. We touched on this growing AI sector and the impact it’s having on markets. Click here to see a replay of this session:
Other technology companies, specifically semiconductors, continued to dominate, with companies like Nvidia posting significant gains. On the other hand, energy sectors faced headwinds, with oil prices experiencing a decline in the quarter.
Consumer spending remained a crucial driver of economic growth, although there were indicators such as consumer optimism falling compared to the previous year. Economic indicators like GDP growth and employment data were closely watched for signs of economic health.
Globally, the economic outlook was mixed, with some regions showing signs of resilience and others facing challenges. Emerging markets, particularly in Asia, saw strong performance, while geopolitical risks and economic uncertainties in certain regions posed challenges. Geopolitical events, such as elections in key countries and trade developments, played a role in shaping market sentiment and economic policies.
Overall, the second quarter of 2024 was characterized by a complex interplay of economic factors, with investors navigating a landscape of changing interest rates, evolving market trends, and global economic dynamics. We are here to support you in achieving your financial goals. If you require any assistance or have any questions please do not hesitate to reach out to Cliff, Mario, Mark, or our TSG team.