Global Equity Weekly

December 06, 2024 | 16:28

Bank Shots

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Equity markets posted further gains this week and head into the end of 2024 on a bit of a heater. The S&P 500 added 1.0%, with strong gains in consumer discretionary, technology and communication services dampened by weakness in energy, materials and utilities. The last month, or three, have seen a rotation firmly out of defensives and resources into more classic early-cycle sectors like those that outperformed this week. With the S&P 500 pushing record highs, and that ongoing rotation at the sector level, there’s not a hint of anything spelling trouble for the economy in equity-market land.

This week’s data mostly confirmed a favourable balance of resilient growth and more near-term Federal Reserve easing. The November payrolls report was somewhat firmer than expected on a headline job print of 227k (versus a consensus call of 200k), but a one-tick increase in the unemployment rate, to 4.2%, was driven by a spill in household-survey jobs. We, and the market, still believe the Fed will cut rates by 25 bps on December 18th given that they’re still in restrictive territory. Most other economic data were solid this week, including a rebound in consumer confidence and a strong reading on November auto sales.

Meantime, the TSX rose 0.2%, with technology and consumer staples gaining while health care and energy pulled back. Banks finished the week little changed despite some earnings hits and misses, and a handful of dividend increases. As a whole, the group is up a strong 18% on the year, with a few names hitting record highs this week. Canada’s employment report was mixed in November, with the strong 51k job print overshadowed by a 0.3 ppt jump in the unemployment rate to 6.8%, or the highest non-pandemic-era reading since 2017. On balance, we believe that is going to prompt another 50-bp rate cut by the Bank of Canada on December 11th. However, barring a tough blow on the trade front, we see domestic demand firming into 2025, as evidenced by better activity in areas like housing and autos. The easing cycle has begun to work, and a record-high TSX suggests equity investors agree.

Source: Bloomberg

Major Index Performance

North American Sector Performances

(% change over period)

Table 1 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 2 - TSX Sector Performance

Source: BMO Economics, Bloomberg

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance