Mackenzie Investments 2024 Mid-Year Market Outlook: Fixed Income Opportunities, the Energy Transition and Innovation Continue to Drive Economy

In the report, Mackenzie states that global Gross Domestic Product (GDP) growth surged in the first of half of 2024, primarily driven by growth in the U.S. However, Canada has faced a weaker economic growth backdrop due to greater sensitivity to higher interest rates.  As a result, the Bank of Canada (BoC) is likely to reduce interest rates in the second half of 2024 in an effort to boost growth. In fact, the relative difference in growth rates between the U.S. and Canada could mean the BoC cuts more aggressively than the U.S. Federal Reserve.

Further, the report notes that equities have remained resilient despite grappling with persistent inflation and rising bond yields, as the market looks toward the implications of earnings and positive economic outlooks.

The global GDP growth trajectory, propelled by robust U.S. performance, underscores the resilience of the world's largest economy," said Lesley Marks, CIO of Equities, Mackenzie Investments. “Looking ahead to the remainder of 2024, we expect global GDP growth to continue to hold, offering support for earnings growth, and an overall positive tailwind for risk assets such as equities.”

Mackenzie forecasts that the three key themes it identified in its 2024 Market Outlook will remain at the forefront of opportunities for investors for the remainder of 2024:

Corporate and Sustainable Debt Underpin Fixed Income Opportunities

In response to reduced expectations of future rate cuts, bond yields have adjusted upward this year, reversing some of the slide that began in October. Corporate credit markets have exhibited resilience, reflecting strong fundamentals and investor demand.  We believe real yields on high-quality corporate bonds present attractive opportunities, and more sustainable debt options are becoming available as the need for energy transition financing grows with investors’ demand for sustainable fixed income solutions.

“We’ve experienced shifting dynamics in fixed income in the first half of 2024,” said Steve Locke, CIO of Fixed Income and Multi-Asset Strategies, Mackenzie Investments. “With the Bank of Canada rate cuts we expect ahead, investors can look to explore the corporate bond market for favorable yield opportunities, while sustainable debt, including green bonds, offers both environmental alignment and appealing yields.”

The Great Energy Transition is Underway

The energy transition continues to present opportunities across asset classes and sectors of the economy. Global economic growth, resource scarcity and climate change are driving investment in cleaner energy, which surpassed investment in fossil fuels in 2023. Opportunities will continue to exist in efficiency technologies, transportation, water, agriculture and sustainable infrastructure.

Further, the Artificial Intelligence (AI) revolution is poised to strain an already overburdened global electricity system.  Generative AI searches consume more than ten times the energy of traditional search methods, highlighting the associated risks of decades of underinvestment in power infrastructure. 

“Despite temporary headwinds, the energy transition remains a compelling investment avenue, buoyed by resource scarcity and ecological constraints,” said Ms. Marks.

Innovation Continues to Drive Growth

Investors are recognizing the transformative potential of AI and continue to pursue investments in the stock market’s successful and established technology giants. However, the opportunity to capitalize on AI extends beyond the largest players, to hardware, services and industries that will enable and underpin AI’s journey.

“AI is one of the most extraordinary growth opportunities of our generation, but investors must assess opportunities carefully and strategize effectively to take advantage of its growth potential. History has shown us that disruptive technologies can often yield both winners and losers,” concluded Ms. Marks.

To learn more about Mackenzie Investments’ 2024 Mid-Year Market Outlook and how it can help inform investment decisions in the year ahead, visit: https://www.mackenzieinvestments.com/en/institute/insights/market-outlook.

About Mackenzie Investments

Mackenzie Investments is a leading investment management firm with $198.9 billion in assets under management as of April 30, 2024. Mackenzie provides investment solutions and related services to more than one million retail and institutional clients through multiple distribution channels. Founded in 1967, Mackenzie is a global asset manager with offices across Canada as well as in Boston, Dublin, London, Hong Kong and Beijing. Mackenzie is a member of IGM Financial Inc. (TSX: IGM), one of Canada's premier financial services companies with approximately $247 billion in total assets under management and advisement as of April 30, 2024. For more information, visit mackenzieinvestments.com.