“Everything old is new again.“
– generally attributed to Jonathan Swift, 17th century English author
The Through Line: For much of 2024, stock and bond prices rose as investors reacted to solid economic progress and the prospect of central banks launching rate-cutting campaigns. Oddly, in the U.S. and Canada equity and fixed income markets began to diverge when the campaigns started to gather steam. Intermediate and long-term bond prices moved down (which pushed interest rates up), causing stocks to wobble. Part of the problem is that interest rates have been abnormally low for much of the last 15 years thanks to central bank intervention in the wake of various crisis periods. Moving forward, our U.S. Wealth Chief Investment Officer Yung-Yu Ma expects longer-term U.S. interest rates and inflation to migrate back toward longer-term historic norms rather than the near zero rates that prevailed in the more recent past. It will take time – and perhaps a bit more volatility – for markets to anchor to a more realistic “new” normal.
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