Quarterly market outlook - 4th Quarter, 2023

Our investment strategists provide the Edward Jones perspective on the latest economic activity and what it may mean for investors.

The Quarterly Market Outlook provides investors with our perspective on recent activity in the capital markets. The Edward Jones Investment Policy Committee offers its viewpoints on the U.S. economy, equities, the bond market, international markets and asset classes, as well as a special topic of interest to investors each quarter.

These aren’t short-term predictions. Rather, this is Edward Jones’ perspective on market and economic topics designed to help you make decisions affecting your long-term financial strategy. As you read through each topic, you'll find specific actions you can discuss with your financial advisor.

Looking back at the 3rd quarter

Monetary policy remained centre stage in Q3. A spike in yields drove equity markets lower, while bond returns were mixed.

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Economic outlook

The Canadian economy has shown early signs of slowing after a resilient first quarter of 2023. Consumption in Canada has slowed, as interest rates remain elevated and early signs of labour market cooling have emerged.

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Equity outlook

Moderating inflation, recovering corporate profits, and an approaching end to the BoC’s and Fed’s rate hikes can support a positive outlook for the remainder of the year, especially for parts of the equity market that have lagged.

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Fixed-income outlook

The Canadian bond market has largely been driven by the direction of yields, which have risen substantially, both in Canada and the U.S., in recent months. Both the 10-year Canadian government bond and 10-year U.S. Treasury yields have risen to highs of the cycle, putting near-term pressure on both stocks and bonds.

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International outlook

While global growth is slowing, inflation is moderating, allowing central banks to pause. The U.S. economy has stayed resilient in the face of high borrowing costs, but its equity market is becoming increasingly concentrated.

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What's the outlook for U.S. government debt?

Elevated U.S. government debt is a well-documented source of anxiety for financial markets. While U.S. federal debt has risen faster in recent years, higher interest rates pose the added challenge of sharply higher annual interest payments. If rates begin to ease, as we expect, this will relieve some pressure, but mounting government debt will remain a broader-term risk.

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Strategic asset allocation guidance

Our Strategic Asset Allocation represents our view of balanced diversification for the fixed income and equity portions of a well-diversified portfolio based on our outlook for the economy and markets over the next 30 years.

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Quarterly market outlook - Full report from Edward Jones

Download the entire quarterly market outlook report here.

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