Kyle Prevost, creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course, shares financial headlines and offers context for Canadian investors.
A look at 2024
After last year’s bold 2023 markets forecast, we’re offering our view for 2024. A quick reminder: forecasting markets is difficult. Countless variables — geopolitical events, elections, pandemics and unexpected disasters — can change outcomes quickly. Still, there are broad trends and practical rules of thumb that Canadian investors can use when planning for the year ahead.
With that caveat, here’s how we see the markets playing out in 2024.
Canada’s TSX 60 will gain 15%, outperforming the 8% gain for the S&P 500
This prediction isn’t based on a belief that Canada’s economy will magically overtake the U.S., or that Canadian companies possess a secret edge. It’s a valuation argument: lower-priced companies tend to suffer less when negative headlines arrive than the highest-valued stocks.
The S&P 500 enjoyed a very strong 2023 and was up substantially for the year. Markets often price in future optimism, and much of that optimism is already reflected. Canada’s TSX 60, meanwhile, rose more modestly last year amid headlines about slower growth and without the AI-driven frenzy that helped lift many U.S. names.
At the moment, a TSX 60 ETF such as XIU trades at roughly a 13x price-to-earnings ratio, while a broad S&P 500 ETF like SPY trades around 24x. The U.S. has more dominant global companies and a more favourable tax environment, but history suggests U.S. valuations are currently elevated. Our view is that Canadian stocks could have a strong second half of the year: TSX 60 up about 15% for 2024, while the S&P 500 finishes the year up closer to 8% and with more volatility.
Tech stocks will underperform the TSX Composite
Tech dominated headlines in 2023. Some of the biggest winners among the so-called Magnificent Seven saw huge gains, led by companies like Nvidia, while even established names recorded strong returns. Canadian tech successes such as Shopify and Constellation Software also enjoyed significant rallies.
But those gains were partly driven by speculative enthusiasm — much of the upside was pulled forward by excitement around artificial intelligence and other trends. By contrast, many Canadian “boring” sectors — banks, insurance, utilities, pipelines, telecoms and railways — lagged because higher interest rates made yield-bearing assets relatively more attractive. Those companies did not stop generating profits, though their stock prices reflected higher financing costs and investor rotation into fixed income.
We expect a rotation back toward these steadier sectors later in 2024, especially in Canada. That doesn’t rule out a continuation of the tech rally for a time; investor psychology and momentum can carry high-growth names further before valuations reprice. But over the full year, the TSX Composite should outperform many of the high-valuation tech names that surged in 2023.
The electoral elephant in the room and its effect on the markets—and everything else for much of 2024
The U.S. election will dominate headlines and markets in 2024. Historically, election years have often been steady for U.S. equities, but this cycle is unusually fraught. The potential outcomes carry significant implications for global trade, policy certainty and investor confidence.
One plausible scenario is a narrow re-election for the incumbent, coupled with a Republican-controlled Senate. That split would likely produce policy continuity with limited major legislative change — a status quo that corporations tend to prefer. In that case, markets could respond positively, with a strong finish to the year for U.S. stocks and a lift for Canadian equities.
The alternative — a return to leadership that threatens democratic norms and institutional stability — would create far greater uncertainty. Even if short-term market reactions to expected tax or regulatory changes were positive, the longer-term damage to global trade, investor confidence and productivity could be severe. The electoral outcome is thus a major risk factor for portfolios in 2024 and beyond.
Flatlining GDP numbers generating more talk of “Is it a recession or not?”
We expect Canadian GDP to hover near zero growth for several quarters, producing repeated debate about whether the country is technically in a recession. GDP might fluctuate modestly around that neutral level in the first half of the year, with commentators and politicians interpreting the same data for different narratives.
Whatever label you apply, the reality is that Canada’s per-capita GDP — and by extension, the standard of living for many — has been under pressure. Productivity growth remains a long-term challenge, and absent decisive policy action to address structural issues, we don’t expect a quick reversal in 2024.
Four quick hitters for 2024
Four shorter themes to watch this year:
Oil prices may stay below $85 USD per barrel
Rising non-OPEC supply and weaker global demand driven by slower economic growth argue against a major oil price spike. Expect oil to trade in a relatively restrained range unless a significant supply disruption occurs.
Inflation should continue to trend down—thanks to gas prices
Lower oil prices will help reduce headline inflation by easing gasoline and some food costs. Core inflation, however, may remain stubborn because higher labor costs and wage gains negotiated over recent years will continue to push prices in many service sectors. That means central banks may only be able to cut policy rates modestly this year.
Tesla could finish the year down 30%
Despite record vehicle deliveries, Tesla faces several headwinds that could weigh on its stock: declining profit margins, intensifying competition from other electric vehicle manufacturers, slower-than-expected EV adoption in some North American markets, and reputational risks tied to leadership distractions. Its valuation remains extremely high, and the earnings growth required to justify that valuation is substantial. These factors make a sizable downside for the equity plausible in 2024.
- Profit margins have contracted.
- Global EV competition, including high-volume manufacturers, is accelerating.
- North American consumer adoption is uneven.
- Leadership distractions have eroded some brand strength.
- Valuation is very elevated relative to current earnings.
Crypto may go down but it will go back up again
Bitcoin and other cryptocurrencies remain volatile. A pullback of 20% or more is possible, but speculative waves and renewed retail interest could drive another sizable rally within the year. While fundamental uses for bitcoin remain limited and skepticism is justified, the psychology of markets — fear of missing out and renewed narratives — can spark sharp price recoveries that attract new traders and media attention.
That leaves investors with a familiar pattern: dramatic rallies followed by crashes. For those who participate, risk management and an awareness of the speculative nature of crypto will be essential.
Overall, 2024 looks like a year where valuation differentials matter, political risk looms large, and cyclical sectors regain attention. Investors who stay diversified, focus on fundamentals and plan for a range of outcomes will be better positioned to navigate the surprises that inevitably arrive.