A rally with legs
Equities kept rallying for the third month in a row, as risks of a recession dwindled further with solid US and European data releases. Technology stocks led the pack in the US and international stocks gained strongly in local currency terms. While valuations are getting stretched in some corners of global markets, we expect solid earnings momentum, driven by resilient growth and a stabilization of the European and Chinese economies. This leaves us with a global stock exposure slightly above neutral in our Mackenzie Global Macro Fund.
Equities
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Commodities
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Treasuries face the reality of a strong economy
In January, US government bonds pared some of their gains from the fourth quarter of 2023. While the Federal Reserve (Fed) will begin cutting rates in 2024, the six cuts that were priced in at the end of 2022 were too optimistic. Economic growth is showing few signs of slowing down, and while inflation is at target, upside inflation risks are manifold. We remain bearish on government bonds in our Mackenzie Global Macro Fund, but our short position is tamer than most times in the last two years.
US dollar catches a breather
After nosediving through the final two months of 2023, the US dollar firmed against most currencies in January. New economic data confirmed the US economy’s resilience and threw cold water on markets’ hopes that the Fed would cut rates in the first quarter of 2024, which was a key risk for the US dollar. We see the US dollar continuing to trend lower against most currencies in 2024, although it won’t be a linear process.
Oil firms in January
The price of oil climbed in January, as inventories tightened, both globally and in the US. The US government has submitted crude oil tender offers to refill its Strategic Petroleum Reserve, which was depleted by half in 2022 to smooth the effect Russia’s invasion of Ukraine had on oil prices. We see further upside for oil prices in 2024. Odds of a global recession are low; China’s economy is stabilizing, and the Organization of the Petroleum Exporting Countries (OPEC) probably won’t increase production in 2024.
US Treasury yields
Source: Bloomberg. Rebased to 100 one year ago. All indices expressed in local currency, except MSCI EM, which is denominated in US dollars. As at January 31, 2024.
Source: Bloomberg. As at January 31, 2024.
Source: Bloomberg. Rebased to 100 one year ago. As at January 31, 2024.
Source: Bloomberg. . Denominated in US dollars As at January 31, 2024.
US Treasurey yield
Source: Bloomberg. As at December 31, 2023.
Source: Bloomberg. Relative to US dollar, rebased to 100 one year ago. As at December 31, 2023.
Source: Bloomberg. Denominated in US dollars. As at December 31, 2023.
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