And who got left out? December 16, 2024 Sign Up | View Online IN THIS ISSUE 8 min read Welcome to TLDRQ4, our definitive guide to what happened in the last three months of 2024 and why you should care! The TLDR team is taking the next few weeks off, so we won’t be back in your inboxes until January 6th. In the meantime, drop us a note in the feedback module below and tell us what we should cover in 2025. —The Editors Q4 IN NUMBERS Oct. 1 – Dec. 16 TSX: +5.9% (+24% YTD) S&P 500: +5.3% (+28.5% YTD) Nasdaq: +9.7% (+33.7% YTD) Bitcoin: +59% (+141.7% YTD) Magnificent 7: +12.6% (+52%) Bloomberg Commodity Index: -0.75% (+5% YTD) Biggest Canadian Gainer*: Shopify ($SHOP), +50.6% Biggest Canadian Loser*: Bell ($BCE), -20% *Universe: TSX 60. Total returns shown in local currency through market close on Dec. 13. Bloomberg data. BIG IMPORTANT STORY Was 2024 Terrific? Main Street and Wall Street Disagree! The financial world had lots of reasons to feel good in 2024. Everyday folks? Not so much. | Wealthsimple This time a year ago, markets were doing pretty darn well. Thanks to a stock rally that began around Halloween, the S&P 500 would finish 2023 up 24%, while the TSX would rise by 8%. And these gains seemed totally warranted: corporate earnings had exceeded expectations, inflation was cooling, and the economy was, all told, chugging along rather smoothly. But, despite the remarkable end to 2023, investors were feeling more than a tiny bit cautious about 2024. In fact, they had all sorts of worries — about rising geopolitical tensions, about whether inflation would surge again, about the very real risk of recession (Montreal research firm BCA put the odds at 25%). And on and on. The other shoe was going to drop at any moment. You could feel it. And guess what? This year was full of turmoil. Devastating wars dragged on, and expanded, in Ukraine and in the Middle East. Donald Trump was nearly assassinated. Joe Biden dropped out of the U.S. presidential race. China conducted more, and bigger, military drills around Taiwan. The French and German governments collapsed. And that’s to say nothing of major headlines here at home — like the Canada Post strike, or the Jasper wildfire, or the immigration policy reforms, or the rising unemployment rate. Yet all this chaotic news did not make markets flinch even one tiny bit. As of this writing, globally stocks are up 22% since January 2024, while the tech-heavy Nasdaq is up well north of 30%. In other words, all the bearish predictions for 2024 were way overblown, if not outright wrong. This was a good reminder about the perils of trying to time the market based on forecasts or your feelings about the world. But that was just one takeaway. Here are three other big lessons from 2024. [1] Wall Street loves almost nothing more than a rate cut As we discussed last week, there’s some debate among financial institutions about whether U.S. stocks are overheated. But, as far as 2024 went, investors couldn’t get enough. The S&P 500 has soared by 28.5% year-to-date, putting it on track for one of its best annual performances this century and beating some forecasters’ estimates by 20 points or more. The TSX, for its part, is up 24% on the year, its second-best annual performance over the past 20 years — a remarkably strong showing for an index with few tech giants. The main reason for these stellar returns, despite all the risk and global unrest, was the plain and simple fact that companies have raked in far more money than nearly anyone expected. It’s almost shocking: depending on the quarter, between 75% and 80% of S&P 500 companies have beat earnings estimates, growing their profits by something like 9.4% over last year. (But probably the best way to wrap your head around U.S. companies’ profitability is to look at this wild chart.) Many publicly traded Canadian companies have also raked in earnings that have far exceeded forecasts. So why have corporate profits been so surprisingly stellar? It largely comes back to inflation: this year’s dramatic slowdown in the rise of consumer prices, for everything from groceries to gadgets, gave central banks breathing room to at long last slash interest rates significantly. Which, in turn, encouraged borrowing and spending. Which, in turn, benefited companies’ bottom lines. [2] Main Street mostly just cares about prices While the stock-market party has raged, everyday folks on Main Street haven’t been celebrating. Just the opposite: they’re pretty ticked off. That’s largely because slowing inflation, though good for Wall Street, doesn’t mean prices are falling (that’d be deflation); it just means prices are rising more slowly, which is why a trip to the supermarket can still cause sticker shock. It’s no wonder, then, that great numbers of people — especially those without investments or homes that have climbed in value over these past few inflationary years — feel as if they’re on increasingly precarious economic footing. And who can blame them! You can’t eat strong quarterly GDP growth, after all. Adding to frustrations here in Canada, the country’s moderately low (but rising) 6.8% unemployment rate has obscured the fact that many available jobs are for low-wage positions targeted at temporary foreign workers or newcomers. Then, of course, there’s the probably-won’t-be-fixed-anytime-soon housing crisis. Main Street’s discontent has been most evident at the polls. This year, every single incumbent party that faced a vote in a developed democracy — conservative, liberal, whatever — got punished. The U.K. booted the conservative Tories, while Americans shunned the liberal Democrats. Canadians seem poised to follow suit: a recent poll found that only 25% of residents think the country is heading in the right direction, and the opposition Conservatives hold a 19% lead in the polls heading into election season. Point being: people still weren’t, and aren’t, used to prices being so high, and positive lines on a chart or encouraging government press releases didn’t improve their mood. Meaningful day-to-day changes might have. Which is something Canadian leaders might want to consider when developing policies around housing and food and other areas that affect the public where it really counts: in their pocketbooks. [3] Crypto went nuts — but debate about its use cases sort of died We’d be remiss if we didn’t mention the resurgence of a different symbol of anti-establishment-ism: that cryptocurrencies, after cratering in 2022, have sprung back to life. Bitcoin, most notably, is up more than 141% this year. Why? Largely because traders suspect that Donald Trump will help cryptocurrencies — despite their volatility and risk — gain further legitimacy. One of the most notable shifts in this crypto boom compared to the last one, in 2021, is that there has been very little chatter about crypto’s potential use cases, or reasons to exist. People rarely use it to buy or sell things. Now the crypto community simply views Bitcoin, et al., as a “new gold” — that is, a speculative asset that’s primarily used for parking cash to hedge against financial calamity (and to skirt sanctions sometimes, too). Fed chair Jerome Powell gave this view a boost recently when he too compared Bitcoin to digital gold. 2025: The Year Tariffs Upturn Global Trade? As all the botched 2024 forecasts made clear, trying to make accurate predictions about the future is a fool’s game, and even professional investors are generally rotten at it. That caveat aside, many top Wall Street strategists and fund managers guess that the S&P 500 will grow by 8% to 10% in 2025, which would be a fairly typical performance historically. Expectations for the TSX are closer to 4.5%. One big unknown that’s clouding everyone’s crystal balls concerning Canada is the 25% tariff that Donald Trump is threatening to slap on our exports (and Mexico’s) to the States, our largest trading partner. Trump made similar threats during his first term, but, in the end, he raised tariffs only on Canadian steel and aluminum and a few other exports; otherwise, tariffs remained low, especially compared to the duties Trump put on Chinese goods (see chart). TD estimates that, even with a 10% tariff, trade between Canada and the U.S. would basically flatline and Canada’s GDP would fall by 2.4% over two years. But the bank also believes that the tariffs probably won’t go into effect — that is, Trump is probably bluffing. Betting markets agree. This time around, let’s hope the forecasters are more on the money than they were last year. —Ben Mathis-Lilley FROM OUR SPONSOR THE FINAL FOMO INDEX OF 2024 by Stacey Woods IMPORTANT 🇺🇸 Poll: 13% of Canadians think Canada should become the 51st U.S. state. There has to be an easier way to get a Trader Joe’s. Source 🌿 Smoking marijuana down 20%, while eating edibles up 14% in Canada. Everyone too stoned to find their lighters. Source 🚗 You can now buy a Hyundai on Amazon. Have them fill it with your other purchases to save boxes. Source 🧊 If remote work still isn’t remote enough: Canada looking to appoint a new ambassador to the Arctic. Source CRASH & BURN TO THE MOON 🛳️ Disney to launch seven new cruise ships by 2031. Hoping people might forget what cruises are like by then. Source 🍕 Winner of half the $80 million Lotto Max throws pizza party for former coworkers. No cheesy bread; he didn’t win the whole thing. Source 🌮 Taco Bell testing a beverage-focused café concept. Expect a cool new literary scene to flourish at the Live Más Café. Source 📊 Toronto man wins 2024 Microsoft Excel World Championship. Says he has so many people to thank, he can’t organize it all. Source WHO CARES THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Ben Mathis-Lilley (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Clare Douglas (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (lifecycle marketing manager), Matthew Karasz (markets editor) Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 VIEW IN BROWSER PRIVACY POLICY UNSUBSCRIBE Our High-interest Savings Accounts (HISA) are offered by Wealthsimple Investments Inc. (WSII). 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Any views expressed are those of the individual author and/or of Wealthsimple Media Inc., not of Wealthsimple Financial Corp or any of its other subsidiaries or affiliates. The content in TLDR is not investment advice, a recommendation to buy or sell assets or securities, nor any other kind of professional advice. TLDR is not a research report and should not serve as the basis for making investment decisions. Wealthsimple Media Inc. does not endorse any third-party views referenced in this content. When you invest, your money is at risk and it is possible that you may lose some or all of your investment. Past performance is not a guarantee of future results. Historical returns, hypothetical returns, expected returns and images included in this content are for illustrative purposes only. Always research before investing. © 2024 Wealthsimple Media Inc.