Fisher Investments Canada reviews global politics, market breadth and new highs

In Fisher Investments Canada’s review, 2024 has followed the historical positive trend so far, but it wouldn’t be surprising to see increased volatility as the U.S. election approaches. November features a rematch between President Biden and former President Trump, which will generate plenty of headlines and speculation. However, the outcome likely brings few surprises for markets. Both candidates are known quantities to investors, likely helping markets pre-price probable outcomes and move on, regardless of the victor.

It’s also important to note that, like many nations, the United States’ head of state has limited legislative authority. Congress, which includes the U.S. Senate and House of Representatives, remains divided with limited seats up for re-election. Therefore, it seems unlikely either candidate could rely on the backing of a unified Congress to push legislation, which should maintain the current state of gridlock and be bullish for equities.

Fisher Investments Canada reviews a broadening of the bull market in 2024

Some investors attribute the equity rally since 2022′s low to the “Magnificent Seven” – seven large tech and tech-like equities that dominate global equity indexes. However, this bull market is broader than many perceive. A multitude of indexes not driven by technology equities have hit new all-time highs across the world this year, which is a sign of growing breadth. This trend is not new, either. In 2023, nearly three quarters of 1,480 constituents in the MSCI World Index – a widely used global equity benchmark – rose, with 642 up more than 20 per cent.1

While Fisher Investments Canada doesn’t think broader breadth is necessary for markets to keep rising, we believe a diverse set of sectors will benefit from increased business spending this year. In recent years, many businesses froze or reduced spending in anticipation of a recession that never arrived. On the back of that conservatism, we expected business budgets would thaw as the strength of the economy was increasingly appreciated. In recent quarters, we’ve seen early signs of this dynamic playing out and expect the trend to continue. Improved business spending should lead to better earnings. Better earnings could lead to better equity performance and, potentially, a continuation of the broadening trend we’ve observed in recent quarters.

Beware a ‘fear of heights’

As equity indexes have hit new all-time highs, acrophobia – or a fear of heights – has become more prevalent, Fisher Investments Canada reviews. Some investors fear record highs indicate a potential peak and are concerned markets cannot keep going higher. However, history shows this fear is often unfounded, and confuses market highs with actual peaks. By definition, bull markets surpass their previous highs (Exhibit 2), otherwise there would never be extended market growth. Moreover, global equities have historically risen the next year after hitting a new all-time high more than 77 per cent of the time2 – making the temptation to sell a potentially costly mistake.

Exhibit 2: Fear of heights

All-time highs are a good reminder to revisit your investing goals and examine if “fear of heights” is an emotional reaction to feeling uncertain about the future of the market, or if it’s based on data and facts. Equity markets aren’t serially correlated and the market’s level one day has no bearing on what happens the next. Since record highs have historically had a high likelihood of continuing for a period of time, it is usually other factors that cause a downturn. Therefore, Fisher Investments Canada believes investors should look past index price levels to a combination of economic, political and sentiment factors when assessing likely outcomes for equities over the next 12 to 18 months.

Fisher Investments Canada’s outlook for the remainder of 2024

Though we’ve covered a small handful of market themes this year, we believe they help demonstrate some reasons why investor sentiment, while certainly more optimistic, remains restrained. Corporations and consumers are spending, banks are lending, employment trends remain stable and inflation has meaningfully decelerated. Despite largely positive economic data, sentiment suggests the market still has a wall of worry to climb, including the impacts of inflation for the consumer, which in Fisher Investments Canada’s review is a welcome feature this year. While it’s impossible to know if equity markets will end the year as strongly as they did in 2023, we believe this bull market is primed to continue in the latter half of 2024.

Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates. This document constitutes the general views of Fisher Investments Canada and should not be regarded as personalized investment or tax advice or as a representation of its performance or that of its clients. No assurances are made that Fisher Investments Canada will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts will be, as accurate as any contained herein.

Fisher Investments Management, LLC does business under this name in Ontario and Newfoundland & Labrador. In all other provinces, Fisher Asset Management, LLC does business as Fisher Investments Canada and as Fisher Investments.

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