As we start the new year, let’s quickly review the 2023. Investors faced many challenges last year including inflation, interest-rate increases, geopolitical conflicts, and a slowing global economy. That said, those who were patient and rode out the volatility were rewarded.

After several years of challenging returns, equity and bond prices rose amid signs of a slowing global economy and the possibility that central banks may begin to decrease interest rates in 2024. The S&P 500 Index, S&P/TSX Composite Index, were up 24.2% and 8.1% in 2023.

Bonds also did well —Canadian and U.S. bonds (measured by the FTSE Canada Universe Bond Index and the Bloomberg U.S. Aggregate Bond Index) were up 6.7% and 5.5%.

There has been lots of optimism about bonds, which has been slower to materialize than predicted but did ultimately materialize. While yields are likely decreasing this year, it’s important to be nimble with your bond investments. As with stocks, if you missed out on a few days in the year, the return on your portfolio can be materially different. 

Here's a closer look at what we might expect in 2024, from Manulife investments:

Global economy: High interest rates are likely to have weakened the global economy. We believe we will experience a further slowdown in early 2024. Low unemployment and strong business growth in the United States suggest a mild-to-moderate recession is probable. Canada’s economy is much more sensitive to interest-rate changes and, therefore, could be more vulnerable.

Inflation: Higher interest rates may have slowed growth and eased inflation as intended, but the last leg of the inflation battle may be more difficult. As it stands, inflation at current levels could set the stage for central banks to pause increases and eventually cut interest rates in 2024. 

Geopolitics: Investors have been losing sleep over the conflict in the Middle East, which erupted in October, in addition to the ongoing situation in Ukraine. Historical market trends often show that geopolitical events can cause short-term volatility, but markets tend to recover over the longer term.

Over the coming year, we believe both equity and bond investors will benefit from falling interest rates, translating to rising stock and bond prices. However, there’s likely to be fluctuations along the way as the market responds to unexpected economic data. 



Now is not the time to feel paralyzed as an investor. In fact, historical trends suggest that this could be an opportunity. While past performance is not an indicator of future returns, history shows that investing in robust, resilient companies during periods of volatility can lead to favorable outcomes over the long term.

Source: Manulife Investment Management, Capital Markets Strategy, as of December 31, 2023