Broad market gains drive investor optimism

Global markets delivered a “phenomenal year” for investors 2024, with both stocks and bonds performing well, says David Wong, chief investment officer at CIBC Global Asset Management.

He said lower interest rates and wider participation in market growth played a big role delivering returns.

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These positive trends set a hopeful tone for 2025.

Wong said stock markets saw gains across the globe, with the U.S. leading the way, up 36% by November, followed by Canada, up over 25%. International and emerging markets also grew by double digits, hovering around 13% and 14%, respectively. 

Wong attributed this success to a “more favourable interest-rate environment” as central banks focused on supporting their economies over fighting inflation.

The Bank of Canada was the first to act, cutting rates in June, and other central banks, including the U.S. Federal Reserve, soon followed. However, “​​what led to individual market strength in each individual country varied,” he said. 

The U.S. stock market’s growth was fuelled by several factors, including Donald Trump’s re-election, which boosted investor confidence, as well as the continued strength of the Magnificent Seven tech companies — Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla.  These companies saw an average return of 63% in 2024, compared to 27% for the rest of the market.

However, while these tech giants still led, Wong noted that more companies participated in the growth this year, with 36% of S&P 500 stocks outperforming the index, compared to just 26% in 2023.

Canada’s stock market also had a strong year, he said, thanks to gains in its financial and energy sectors, which grew 32% and 28%, respectively. These two sectors, being the largest parts of Canada’s market, helped make it the fourth-best performing market in the world, behind the U.S., Singapore and Israel.

International equity markets also posted positive results but faced challenges due to weaker performance from some large-cap stocks. Wong cited ASML, a key player in the semiconductor industry, as one of the companies that “had a rough year” in 2024. ASML was “down about 1% despite being attached to the AI theme that has worked so well in the U.S.”

Overall, though, he said “it’s hard to be disappointed with returns in any of the major equity markets for the year.”

Looking ahead, Wong noted how resilient the global economy has been. 

“The inverted yield curve that started in 2022 has turned out to be not predictive of a recession, which is a rare miss,” he said. 

However, he warned that proposed U.S. tariffs on Canadian and Mexican goods could create challenges for Canada’s economy, as exports are an important part of its GDP.

“The expectations are for Canada to be able to negotiate out of these tariffs, but it’s something that we need to keep a close watch of,” he said.

Interest rate cuts are expected to continue, and Wong said inflation will remain another key area to watch. 

Wong encouraged a more balanced approach for investors, especially in the U.S., where tech companies have taken on an outsized role in driving returns. Investors should focus on long-term plans, he said.

“The best way that savers can build resilience into their investments is by starting with a plan that considers their investment horizon and long-term goals,” he said. 

Wong emphasized the importance of diversifying investments across different types of assets, industries and regions. Bonds remain attractive, offering reliable income and a buffer against stock market swings. For stocks, Wong said investors should focus on companies with stable earnings or those that pay dividends. 

However, he warned against pulling out of the market too quickly. 

“Doing so represented a big opportunity cost in 2024,” he said, pointing to the nearly 20% return from a balanced portfolio of stocks and bonds this year.

So, although market returns may slow after two strong years — 22% in 2023 and over 35% in 2024 — Wong is optimistic about what lies ahead. 

“There are great reasons to stay fully invested,” he said. 

He pointed to the steady performance of markets and the opportunities available in both stocks and bonds. With inflation under control and interest rates expected to drop further, the conditions for continued growth remain strong.

“If you don’t have an investment plan already, now is a great time to set one up,” he said.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.