Market Commentary – First Quarter 2024

The following market commentary is courtesy of the Plan’s Canadian Equity investment manager, Connor, Clark & Lunn Investment Management.

Global economic divergences grew in the first quarter of 2024. In the US, economic data releases continued to show above-trend growth. Following two consecutive months of reaccelerating inflation, the narrative shifted away from the possibility of a recession and toward more of a “soft-landing” outcome – or even a return to a period of economic strength. These developments were in contrast to Canada, where inflation releases decelerated and activity indicators pointed to slowing economic growth (although not an outright contraction). Regardless, the solid US economic backdrop, combined with the US Federal Reserve’s (Fed’s) decision in March to maintain its expectations for interest rate cuts in 2024 – despite two consecutive months of sticky inflation releases – bolstered investor sentiment toward riskier assets. This led to strong gains for equity markets during the quarter. Bond yields were volatile, but generally rose as financial markets pushed out the timing and magnitude of interest rate cuts. The price of crude oil climbed, driven by geopolitical factors, and breached the US$80 per barrel mark near the end of the quarter.

Equity markets rose over the quarter despite higher interest rates, as stronger-than-expected US economic data reinforced the soft-landing narrative. As a result, the MSCI All Country World Index rose 9.6% in local-currency terms (11.2% in Canadian dollars) over the quarter. Emerging markets equities also posted positive returns, with the MSCI Emerging Markets Index rising 4.6% in local-currency terms (5.1% in Canadian dollars). Canadian equities benefited from US economic strength and higher commodity prices, with the S&P/TSX Composite Index posting a 6.6% gain over the first quarter.

The Bank of Canada (BoC) and the Fed held their policy interest rates steady during the first quarter. That said, robust US economic data drove bond yields higher. Two-year yields rose 30 basis points (bps) in Canada and 40 bps in the US, while 10-year yields rose 35 bps in Canada and 32 bps in the US. Corporate spreads tightened, while provincial credit spreads widened modestly in response to deteriorating provincial fiscal conditions. The FTSE Canada Universe Bond Index declined 1.22% over the quarter.


Unless stated otherwise, all data is as at March 31, 2024 and stated in Canadian dollars. Source: Connor, Clark & Lunn Financial Group Ltd., Merrill Lynch, Pierce, Fenner & Smith Incorporated, S&P Global Ratings, and MSCI.