Economic Outlook in North Bay: What to Expect
n the former starts to deteriorate and the latter is frothy for an extended period, equities tend to fizzle out. Both measures were healthy for most of 2024 but are now deteriorating. If this trend is maintained, a temporary pullback is not out of the question.
The road to higher equity prices will likely require earnings to hold up and for investors to contend with the occasional pullbacks along the way. This means, for the time being, be cautious, but stay invested!
The Canadian economy will likely be sluggish in 2025. Investors must be mindful of the dramatic slowdown in productivity, the recently announced reduced immigration targets, and the possible new tariffs on Canadian exports to the U.S. — headwinds which the Bank of Canada’s (BoC) aggressive rate-cutting cycle can only partially ease. That the BoC is cutting its policy rate faster than the U.S. Fed should keep Canadian fixed income returns from significantly lagging those in the U.S., though the expectation is for less outperformance in credit versus 2024.
Despite potential economic headwinds, the equity market will be driven by strong consensus earnings growth expectations and supported by a reasonable valuation, particularly compared to the U.S. In conclusion, while caution is advised due to deteriorating market measures, staying invested and keeping an eye on earnings growth could lead to continued success in the equity market.
