November 2024

Trump’s re-election on November 5^th poses a complex scenario for the U.S. and global markets. The prospect of an escalation of trade wars is likely to depress corporate investment while lowering real household disposable income, as tariffs are passed on to the consumer in the form of rising prices.  It is anticipated that fiscal spending will remain elevated under Trump. Post Covid evidence suggests that superior U.S. economic performance has benefited from significant deficits. A continuation could be helpful in countering the contractionary impact of high interest rates, supporting job-creation, investment, economic growth, and real incomes. On the geopolitical front, Trump and a large portion of the House Republican Conference will likely scale back aid to the Ukraine. Iran is also likely to come under increased pressure. In November we maintained the twelve-month forward outlook to reflect our view for Growth (U.S. Real GDP growth greater than 2.5%) over the next twelve- month period, in response to the strong U.S. annualized 2.8% growth. We will review this positioning when definitive Trump policies are formalized.

China’s annual inflation rate stood at 0.3%,¹ while China’s surveyed unemployment rate fell to 5% in October 2024.² The Eurozone GDP expanded 0.4% on quarter in Q3 2024.³ Annual inflation in the Euro Area accelerated to 2% in October.⁴

The U.S. economy expanded an annualized 2.8% in Q3 2024, compared to 3% in Q2. It was boosted by a 5.6% surge in consumption of goods and a robust spending on services.⁵ The CPI in the U.S. increased 0.2% month-over-month in October,⁶ while the unemployment rate in the United States was at 4.1% in October.⁷ The trade deficit in the U.S. widened to $84.4 billion in September. Exports declined 1.2% while imports increased 3%.⁸ The Canadian GDP expanded by 0.3% from the earlier quarter in the three months to September of 2024.⁹ The annual inflation rate in Canada rose to 2% in October,¹⁰ while the unemployment rate in Canada was at 6.5%.¹¹ Canadian exports marginally declined by 0.1% in September. Among destinations, sales decreased to Mexico (-14.5%), the United Kingdom (-25.9%), South Korea (-10.5%), and the Netherlands (-9.5%), while it increased to Japan (+13.4%), Germany (+28.2%) and India (+17.1%). Imports to Canada fell by 0.4% over a month to CAD 65.2 billion in September. Among key trading partners, imports from the U.S., which is 60% of all Canadian imports, increased by 0.8%. Imports from countries other than the U.S. declined by 2.3% in September.¹²

As U.S. equity markets braced for the results of the Presidential election, the S&P 500 declined by 0.9%, mid-caps declined by 0.7%, and small caps by 2.6%. U.S. markets kicked off November with an upbeat reaction to the Presidential election, amid a backdrop of robust economic data and mixed Q3 corporate earnings results. Despite a mid month pullback, the S&P 500 Index recovered to post its biggest monthly gain of the year, up 6% in November. Canadian equities finished the month on the upside. The S&P/TSX Composite increased 0.9%. The S&P Europe 350 dropped 2.1% in October, while Pan Asia equities fell, and local currencies depreciated against the US dollar on the back of the rising U.S. rates. The S&P Pan Asia BMI (USD) closed the month 4.5% down.

In November, we maintained all exposures held in October. Sectors benefiting from the Trump presidency, aligned with his policies that favour deregulation and tax reforms include energy (oil, gas, and coal), defense, financial services, infrastructure, manufacturing, and healthcare. We continue to maintain short duration U.S. fixed income exposure as yields are expected to respond to renewed inflation. Gold is held across all models as a long-term strategic asset. The U.S. election results have led to a set-back in gold’s impressive 2024 rally due to continued strengthening in bond yields and the US dollar, risk-on sentiment in equity markets, and the hope of some resolution of geopolitical tensions. Central bank holdings of gold reserves remain strong as the primary incentive is investing for security over returns.

We are headed to a world where protectionism is to be elevated. With equity markets heavily concentrated and fully valued, and with cryptocurrencies not fully embraced and not a replacement for gold, we stand by our view that volatility is best managed using our top-down focus.  Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.

Deborah Frame, President and CIO

Drew Millard, Portfolio Manager

¹ Trading Economics. China Inflation. November 9, 2024.

² Trading Economics. China Unemployment. November 15, 2024.

³ Trading Economics. Europe GDP. November 14, 2024.

⁴ Trading Economics. Europe Inflation. November 19, 2024.

⁵ Trading Economics. U.S. GDP. November 27, 2024.

⁶ Trading Economics. U.S. Inflation. November 13, 2024.

⁷ Trading Economics. U.S. Unemployment. November 1, 2024.

⁸ Trading Economics. U.S. Trade. November 5, 2024.

⁹ Trading Economics. Canada GDP. November 29, 2024.

¹⁰ Trading Economics. Canada Inflation. November 19, 2024.

¹¹ Trading Economics. Canada Unemployment. November 8, 2024.

¹² Trading Economics. Canada Trade. November 5, 2024.

Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. October 31, 2024. Index performance is based on total returns and expressed in the local currency of the index.