Portfolio Manager Crista Caughlin discusses the economy and factors that drove markets in the third quarter of 2024.
Key points from this episode:
- In the third quarter, most central banks either continued cutting rates – like the European Central Bank and the Bank of Canada – or started cutting rates – like the U.S. Federal Reserve.
- Inflation risks have diminished and downside risks to growth and employment have increased, so central banks are responding with easier policy.
- Crista believes the Bank of Canada will continue to make 25 basis point cuts at future meetings, but a 50-basis point cut is potentially on the table thanks to the Fed's more aggressive cut.
- Because central banks are easing policy and the market expects them to continue to do so, the yield curve has started to normalize.
- All else equal, a faster, more aggressive central bank reduces the probability of a recession.
- The third quarter was a Goldilocks scenario. Growth was weak enough to allow central banks to ease policy, which is really good for bonds and interest-rate-sensitive equity sectors, but it was not so weak that there were obvious signs of a recession.
- Regardless of whether central bank easing corresponded to a recession or a soft landing, equities have historically gone higher and spreads tighter after the first central bank cut.
- One of the main questions on Crista's mind going into the fourth quarter: How long will growth and policy be tailwinds driving the markets?
Host: Kevin Minas, CFA, MBA, CAIA, Mawer Institutional Portfolio Manager
Guest: Crista Caughlin, CFA, Mawer Portfolio Manager
For more details and full transcript visit: https://mawer.com/the-art-of-boring/podcast
This episode is available for download anywhere you get your podcasts.
Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore.
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