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  1. Market Commentary January 2025

    Key Takeaways

    Full year 2024:

    • Despite reductions of policy-setting interest rates by central banks, yields on longer-term bonds finished the year higher than they started the year.

    • Positive risk appetite helped corporate bonds perform well, led by lower-quality issuers.

    • Global equity markets posted robust returns, with U.S. equities outperforming other developed markets, driven by heavy concentration into the ‘Magnificent 7’ stocks.

    Fourth Quarter:

    • Central banks continued to ease monetary policy in Q4, with the Bank of Canada cutting its policy interest rate more aggressively than did the U.S. Federal Reserve.

    • The Republican victory across both the executive and legislative branches in the U.S. ignited expectations of economic growth, pushing bond yields and stock prices higher.

    • Risk sentiment helped corporate bonds continue to outperform government bonds.

    • Markets remained volatile: while North American stock markets continued to outperform most international indices, Canadian stocks managed to outperform U.S. stocks in Q4, as sources of returns in the U.S. narrowed into year-end.

     

    Economic and Market Update

    Economic Summary: In the U.S., economic activity continued to expand at a solid pace in Q4. The rate of inflation continued to slow but remained above the central bank’s 2% objective. The labour market in the U.S. remained resilient, as the unemployment rate has remained low compared to historical norms. A decisive victory for Donald Trump and the Republican Party further boosted expectations for continued growth. The return of the President-elect’s old tactics of threatening tariffs to influence trade, security, and drug control re-introduced some economic uncertainty, particularly regarding the potential return of inflationary pressures. Those concerns prompted the Federal Reserve to slow the pace of its policy easing, as it lowered rates by just 0.25% at each of its two meetings in Q4, following the 0.50% cut in September. Throughout 2024, the Fed reduced rates by a total of 100 basis points, from 5.50% to 4.50%. Nonetheless, bond yields were significantly higher for most maturity terms during the fourth quarter as the market priced in not just a stronger economy than had been the expectation during Q3, implying less interest rate cuts by the Fed, but also growing concerns about the government deficit.

    In Canada, growth remained positive during 2024 and improved a bit to close the year, but continued to fall short of the Bank of Canada’s expectations. Similarly, inflation came in lower than expected and below the Bank’s 2% target. The labour market continued to soften for much of the year, with employment growth falling short of labour force growth. The weakness in the labour market and economy, along with tamed inflation, prompted the Central Bank to cut rates at the pace of 50 basis points at each of its two meetings in Q4. For the full year, the Bank of Canada ended up lowering its policy rate by a total of 175 basis points, from 5% to 3.25%. The market has been expecting the Bank of Canada to need to continue cutting rates due to slower economic growth in Canada, but the fear of a possible trade war with the U.S. has made the economic outlook somewhat murkier. 


    Chart1-(1).png
    Bond Markets: During the quarter, yields on mid- to long-term bonds in Canada rose in sympathy with rising bond yields in the U.S. However, bond yields in Canada rose to a lesser extent, and yields on shorter-term bonds were actually little changed over the quarter. The FTSE Canada Universe Bond Index was basically flat during Q4 and posted a return of 4.2% for the full year. Although interest rates rose, credit spreads (i.e. the extra yield on corporate bonds versus government bonds to compensate for their extra risk) continued to grind lower, helping corporate bonds post positive overall returns in the quarter. Tightening credit spreads reflected the generally positive risk-on tone to the market, despite some volatility.  Lower-rated BBB bonds generally performed better than higher-quality A-rated bonds.  Credit spreads have now generally fallen back to levels similar to those experienced in 2021, when markets did quite well after the pandemic. The on-going appetite of investors for the extra yield offered by corporate bonds over government bonds is indicated not just by falling credit spreads, but also by investors’ enthusiasm to support the primary issuance market. Corporate bond supply continued to be very robust in the quarter, with $30 billion in new issuance, resulting in a record-breaking year with $141 billion of new issuance in 2024.  Nonetheless, on balance, we do not think the current risk premium adequately compensates for downside risk, particularly in longer-dated corporate bonds, and have a bias towards shorter-dated credit where we view the risk / reward trade-off as being more favourable.

    Chart2-(1).pngStock Markets – Overview: Trump’s presidential victory and the Republican party’s ‘red sweep’ in the Senate and House of Representatives sparked optimism surrounding economic growth and a new era of U.S. exceptionalism. As a result, North American equity markets extended their rally in Q4, capping off a year of robust returns. The S&P 500 returned 2.4%, bringing its year-to-date return to 25%. Within the U.S., the broadening of returns paused during the quarter as the chase for growth intensified, with mega-cap growth names like Tesla driving performance. Canadian equities surprisingly outperformed the U.S. market over the quarter, returning 3.8% in Q4, despite threats of widespread tariff negotiations looming on the horizon that could negatively impact Canadian corporate fundamentals. At a sector level, strength in the technology, financials, and energy sectors more than offset weakness in telecommunication companies as well as in the materials sector. Elsewhere, major developed markets from Europe and Asia (EAFE) underperformed last quarter as deteriorating Chinese growth prospects and weak economic growth in the Eurozone weighed on equities. Notably, foreign investors of U.S. denominated securities benefitted from a rebounding U.S. dollar with the dollar index adding over 7.6% in Q4.

    Chart3-(1).pngU.S. Equities: U.S. equities remain supported by resilient margins and strong corporate earnings growth with over 70% of businesses surpassing bottom-line expectations last quarter. We remain attentive to the broadening of earnings performance and note that this trend has continued, albeit at a normalized pace versus prior quarters. More specifically, our work shows that members of the Russell 1000, excluding the Magnificent 7, posted median earnings growth of 6% last quarter, down from nearly 9% in Q3 but comparable to Q2 (6%). Looking forward to 2025, analysts continue to forecast U.S. exceptionalism, with forecasts of ~12% earnings growth.

    Following Trump’s presidential victory, stocks with greater sensitivity to the U.S. economy, such as small cap businesses, benefitted from expectations of domestically focused growth initiatives. However, stubborn inflation and expectations of fewer interest rate cuts by the Federal Reserve saw the trend of broadening sources of returns pause into the end of the year. Instead, market concentration reaccelerated with investors rushing back towards mega-cap growth stocks. In fact, Tesla – which is approximately 2% of the S&P 500 Index by market cap – contributed approximately one-third of the total index return in Q4, while the Mag 7 as a group contributed over 100% of total returns. In other words, U.S. large cap companies excluding the Magnificent 7 declined in aggregate last quarter.

    Canadian Equities: Against the backdrop of cooling inflation and below-trend growth, the Bank of Canada continued to loosen monetary policy. As a result, Canadian companies
    showed signs of improving efficiency with return on equity – a gauge of corporate profitability – improving versus prior quarters. Under these conditions, investors remained focused on higher quality, high-dividend paying companies – particularly within the financial sector. Relative to prior quarters, this group witnessed greater contribution out of non-bank financials (such as asset managers and insurance companies), as the premium investors were willing to pay for Canadian banks remained elevated. Across other sectors, the energy sector had a positive quarter as the price of oil stabilized, but falling prices for raw industrials pushed the materials sector lower.

    Bottom line: U.S. political developments and subsequent growth expectations dominated market sentiment last quarter. As a result, investors dialed back rate cut expectations and bond yields moved higher. In equity markets, the potential for an era of higher-for-longer rates prompted a resumption of investors crowding into growth stocks. Going forward, we remain cautious of elevated valuations and continue to prioritize diversified sources of returns with a long-term outlook. Nonetheless, despite rich valuations, our base case remains that investors’ enthusiasm for equities will persist in the near-term and stocks should continue to outperform bonds.

    Downloadable Copy

     
    Mark Warywoda, CFA
    VP, Public Portfolio Management    		 Ian Whiteside, CFA, MBA
    AVP, Public Portfolio Management    		 Johanna Shaw, CFA
    Director, Portfolio Management    		 Jin Li
    Director, Equity Portfolio Management
     
    Tyler Farrow, CFA
    Senior Analyst, Equity    		  
    Andrew Vermeer
    Senior Analyst, Credit    		  
    Elizabeth Ayodele
    Analyst, Credit    		  
    Francie Chen
    Analyst, Rates
    ADVISOR USE ONLY

    Any statements contained herein that are not based on historical fact are forward-looking statements. Any forward-looking statements represent the portfolio manager’s best judgment as of the present date as to what may occur in the future. However, forward-looking statements are subject to many risks, uncertainties, and assumptions, and are based on the portfolio manager’s present opinions and views. For this reason, the actual outcome of the events or results predicted may differ materially from what is expressed. Furthermore, the portfolio manager’s views, opinions or assumptions may subsequently change based on previously unknown information, or for other reasons. Equitable® assumes no obligation to update any forward-looking information contained herein. The reader is cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Investments may increase or decrease in value and are invested at the risk of the investor. Investment values change frequently, and past performance does not guarantee future results. Professional advice should be sought before an investor embarks on any investment strategy.

     
  2. [pdf] A Unique Approach to Managing Disability
  3. Homewood Health COVID-19 Resources

    As the COVID-19 situation continues to rapidly evolve, you may need  information from a trusted source to support your clients, their organizations and their employees.

    Through our partnership with Homewood Health, the Canadian leader in mental health and addiction services, all of our clients and their plan members have access  to a number of tools and resources designed to provide guidance and support.

    Online Cognitive Behavioural Therapy

    For plan members dealing with increased anxiety during these uncertain times, Homewood’s Online Cognitive Behavioural Therapy tool, i-Volve, can help. Through self-paced, web-based therapy, i-Volve can help plan members identify, challenge and overcome anxious thoughts, behaviours and emotions.

    All Equitable Life clients and their plan members have access to i-Volve. It’s available 24 hours a day, seven days a week, wherever you choose to access it.

    Learn more about Online CBT or access i-Volve at Homeweb.ca/Equitable.

    COVID-19 Support Resources

    Drawing on their expertise in mental health, as well as guidance from trusted sources including Health Canada, the Public Health Agency of Canada and the World Health Organization, Homewood has created a number of resources to help support your clients and their plan members.

    ​​If you have any questions, or wish to discuss the tools, please reach out directly to Homewood. They are here to help support you, your clients and their employees through these unprecedented times. Contact your Homewood Health Account Manager or Homewood’s Customer Experience Team by phone at 1.833.375.0270 or email customersupport@homewoodhealth.com
  4. Do clients imagine owning a dream home?


    We’re here to help make that happen! Clients who contribute to a First Home Savings Account between May 1 and September 30, 2025, will be entered for a chance to win an incredible $8,000 in our Close to Home contest. Whether opening a new account or making an annual contribution, this is a golden opportunity to help them get one step closer to homeownership.

     

    Advisors, Your Efforts Matter Too! By guiding clients towards their homeownership dreams, you’ll be entered to win $1,000 as a special thank you for your dedication and support. At Equitable®, we believe that when we grow together, success is mutual.



    Don’t Miss Out! Enter today using Equitable’s user-friendly online application platform, EZcomplete®, or process an online transaction with ease using Equitable’s EZtransact®. It’s fast, simple, and could bring clients closer to their dream home.

     

    Want to learn more? Speak to your Director, Investment Sales, and help clients take the first step towards making homeownership a reality.

     

    Equitable’s Close to Home Contest: No purchase necessary. Contest period May 1, 2025, to September 30, 2025.  Enter by making a deposit to an Equitable FHSA during the contest period or by submitting a no-purchase entry. Two prizes for a total value of $8,000 CAD to be drawn on October 15, 2025, will be awarded. The servicing advisor for the policy to which the selected entrant made the deposit is also an eligible winner and will receive a $1,000 CAD prize. For example, if an Equitable client is a winner of the $8,000 prize, the client’s servicing advisor wins a $1,000 prize.  Open to legal residents of Canada of the age of majority. Odds of winning depend on number of eligible Entries received during the Contest Period.  For full contest rules, including no-purchase method of entry, see the full contest rules. 

  5. Let’s “Talk Money”: Helping clients feel better about their finances This November is Financial Literacy Month, and the theme is simple but powerful: “Talk Money.” The goal is simple—get Canadians talking about money. When people open up about budgeting, debt, or financial stress, they feel more confident and less alone.

    Money and mental health are connected
    Many Canadians feel stressed about money. That stress can affect their mental health. As an advisor, you can help by starting honest conversations. When clients talk about their worries, they’re more likely to take action and feel better.

    How advisors can help
    You don’t need to be a therapist. Just listen, ask questions, and offer simple steps. Here are a few ideas:

     
    Let’s talk money
    Talking about money helps people feel stronger and more in control. This month, let’s help clients open up, take action, and build better habits—financially and emotionally.

    If you have any questions, feel free to reach out to your Director, Investment Sales.
  6. Retirement Savings Plan (RSP, LIRA, RIF, LIF)
  7. Introducing Equitable EZBenefits: A better group benefits solution for your small business clients If you serve small business owners, chances are they’re looking for a group benefits solution that’s affordable, sustainable and easy to manage. That’s why we introduced Equitable EZBenefits™. It’s a unique group benefits solution designed with you and your small business clients in mind.
     
    Options to fit every need
    Available to organizations with between 2 and 25 employees, EZBenefits offers a range of plan design options to match different needs and budgets. * Whether your client owns start-up or a growing company, we’ve got them covered. Plan options include a mix of Life, Health and Dental coverage. ** Clients can also add Long-Term Disability (LTD) coverage or a Health Care Spending Account (HCSA).
     
    Embedded services to support health and wellness
    To provide employees with added support for both their physical and mental wellbeing, all our plan design options include:
    • Anytime, online access to medical professionals through our Virtual Healthcare solution from Dialogue,
    • Access to professional counselors – via the telephone, the web or in-person – through our Employee and Family Assistance Program from Homewood Health®, and
    • Online resources to help manage health, financial and family challenges through Homeweb, Homewood Health’s online wellness portal.
    Extra HR support for your clients
    EZBenefits also comes with built-in HR support through Equitable Life’s partnership with HRdownloads® This takes the heavy lifting out of common human resource tasks with HR support tools and services, including:
    • HR Technology: An award-winning cloud-based human resource information system to provide help from onboarding to offboarding and everything in between.
    • HR Content: Access to a library of over 3,000 HR documents, templates, compliance resources and articles, with 25 free document downloads.
    • HR Training: A free Workplace Diversity and Inclusion online training course.
    • HR Support: One free Live HR Advice call with a seasoned HR expert.
    A streamlined process to optimize your time
    We know that advising small business clients can be challenging. We’ve created a streamlined benefits process that provides rapid quotes, hassle-free plan implementation, simplified renewals and that is easy to administer. That way, you can spend more time advising your clients and building your business – and less time with administrative back and forth.
     
    Pricing stability for long-term stability
    When it comes to attracting and retaining talent, we know your small business clients are competing with larger organizations that have big budgets and lots of resources. That’s why we’ve designed EZBenefits to provide long-term pricing stability for health and dental benefits.
     
    Find out more
    Watch this video to learn how EZBenefits can help you and your clients. You can also visit info.equitable.ca/ezbenefits for more details or to request a quote. If you have questions, contact your Equitable Life Group Account Executive. If you don't have an Equitable Life Group Account Executive, email us at EZBenefits@equitable.ca.
     

    * Not available in Quebec.
    ** Dental coverage is not included with the Bronze plan design option.
  8. Important cybersecurity readiness guidance As an advisor, you collect and store clients’ sensitive personal information. Protecting this information is essential. In July 2023, the Canadian Insurance Services Regulatory Organization (CISRO) released a guide on Cybersecurity Readiness. It includes tips on keeping this sensitive client data and your business systems safe. 

    Please read the guide in full. Also, check your own practices to be cyber ready and reduce your risk of an incident. 

    Some key tips in the guide include:

    1. Make cybersecurity a priority: Stay alert to cyber threats. These can be suspicious emails, texts or calls. Make sure your team knows how to keep your data and systems safe and has clear, documented processes to follow.

    2. Know what to protect: Understand what data and business systems need to be protected. 

    3. Identify the risks: Spot the risks in your practice and those from third-party service providers.

    4. Implement security measures: Take steps to protect your data and business systems.


    5. Be ready to respond: Know how to spot and react to cyber incidents. The guide has useful tips on creating a Cyber Incident Response Plan.

    And lastly – if you receive client instructions electronically (by email, text, or messaging apps), always confirm these over the phone to ensure it’s really the client sending the instructions.

    Keep your business and important client data safe by staying informed and alert. We encourage you to read the full  Cybersecurity Readiness document to learn more about how to prepare for cyber threats.

    In our industry, protecting clients’ sensitive data and systems is essential. Thank you for your commitment to cybersecurity!

    ® or TM denotes a trademark of The Equitable Life Insurance Company of Canada.
  9. General Information
  10. General Information