All That is Now, All That is Gone, And All That's to Come

It’s been a great year for investors, with market performance far exceeding the consensus estimates. Although we’ve had volatility pick up this week, it should not spoil a year that has helped many of our clients reach their savings or income goals ahead of plan. As is tradition in our recap, we want to end the year sharing our predictions for 2025.

Canada: last year we forecasted single digit equity returns, challenges to achieve economic growth and interest rate cuts in response to weak growth. I’d say that the country performed in line with our expectations but that the market did significantly better. Year to date, GDP has averaged 1.2%, CPI at 2.4%, unemployment is at 6.8% while the TSX is up 16%. This week we saw our Finance Minister, Chrystia Freeland, resign over a disagreement with Prime Minister Trudeau. This month, we were threatened with tariffs by President-elect Trump. It goes without saying that we are having a difficult end of the year.

In the year ahead, the country will have two major obstacles to overcome at an economic level: declining labour productivity and the ongoing housing affordability crisis. How we as a country respond to this is up in the air; the current administration has been in power while these two economic realities developed and were slow to identify these risks and even slower to provide solutions. It is likely that we have an election and it is also likely that we have a new Conservative government. Change is positive as new leaders, new minds and potentially new solutions to continuing challenges emerge. That being said, the Conservative Party of Canada has been vocal in its criticisms but light on the details when it comes to these potential solutions.

Our forecast is for Canada to continue to grow at a very modest pace, absent significant regulatory and tax changes. We think that inflation will continue to drop in the face of subpar growth, however, there are very real risks to this outlook: trade wars are inflationary and lower interest rates could reignite housing bubbles. We expect the stock market to register modest gains in the mid-single digit range.

United States: last year we anticipated economic growth challenges, the avoidance of a recession, single digit equity returns, three interest rate cuts but we were unwilling to predict the outcome of the elections as we believed it too close to call. A year later, we were wrong about the economy’s challenges: it has grown at a very healthy 2.7%. We were wrong about the market as well: the S&P 500 is up 23%. We were right on the money about rate cuts however; three as of this week. We were also right that the election would be close; while President-elect Trump outperformed relative to 2016 and 2020, a shift of 200,000 votes would have yielded a different result.

The US is the economic envy of the developed world; last year we used the word resilient to describe the economy and I think that the same word should be applied this year. The American economy is healthy even if does have its challenges; the Federal budget deficit is rising too quickly, commercial and office real estate are much weaker than what we are led to believe, and healthcare is still too costly. The incoming administration intends on streamlining government (in response to spending) and on pursuing further de-regulation within the economy in order to turbo charge economic growth. It also wants to cut taxes (not good for spending), oversee the largest deportation of illegal residents (not good for tight labour markets) and wants to start a trade war with many of its partners (not good for growth, nor inflation).

In the year ahead, we think that the economy will grow at a healthy pace albeit slower than this year. We believe the stock market will register gains between 9-12%, that there will be significant divergence between the winners and losers and that we will see more wild intra-day movements brought on by the way in which Mr Trump governs.? We are not sure how much of his agenda will be implemented this year and we have difficulty anticipating the impact of ‘co-President’ Elon Musk having such a large influence on government. Inflation could become an issue, as hinted by the Fed during this week’s meeting (although this morning’s data was quite positive). In summary, there’s a lot that can happen which is why our base case scenario is that a more modest version of the current euphoria continues until a catalyst interrupts the momentum. When that catalyst occurs….whether in 3 months, 6 months, 2 years….that’s a prediction that we are not comfortable making.

Rest of the world: last year we predicted that the war in Ukraine would continue while the Gaza conflict would end. While both campaigns continue, we got a unexpected surprise with Syria toppling its dictator. We’ve seen political dysfunction in France, Germany, Japan and South Korea, while Italy has been (surprisingly) decently managed under a Meloni government. China has struggled to revive its weakening economy even with the large stimulus packages that it has enacted. Argentina is seeing a sharp reversal in its fortunes with the Milei experiment yielding more positive consequences thus far.

There are no Olympic games or World Cup to bring the global culture together in 2025, but it would be a mistake to assume that we will not have any unexpected sporting moments, people going viral or a new trend that captures all of our attention. This year brought us Moo Deng, the baby pygmy hippo; maybe next year we get an adorable giraffe or a really smart chimpanzee.

I’ll end the year’s recap with Leon’s thoughts: 2025 could be a year where people’s faith in finance and politics are restored. It will not be without its hiccups but, ever the optimist, he thinks we are overdue to evolve from our current state of cynicism and anxiety. He just wants to see everyone as happy as he is; who can fault these hopes?

Other Predictions for 2025?

Top stocks

David: torn between First Solar, Eli Lilly or Nvidia. For those interested, last year I predicted that Nvidia would be our top performer again and with a 163% return, I was right ??I also expect the AI trade to lead with the electrification theme (utilities, renewables, alternative energy) to register strong gains.

Leon: his top pick this year is Microsoft. Last year, his picks were more healthcare oriented, this year he believes in AI adding value in many different sectors with his favorite ideas associated with data centers.

Sports

David: Habs need to make the playoffs (not a prediction), although I think the Jets are winning the cup. I think that the long suffering fans of Detroit will finally see the Lions win the Superbowl. I want AC Milan to win their 8th champions league trophy (happy 125th birthday week, to my beloved club) but Liverpool seems to be best positioned at this point.

Leon: “NFL, it has to be the Bills” (another long suffering fan base), the Devils to win the Stanley Cup and the Celtics to win again. He still does not care about baseball, however.

Thank Yous

Thank you to everyone who made this year what it was.

Thank you to Leon for making our work, fun. What’s been accomplished this year is even more satisfying, sharing it with you.

Thank you to Myles for your major contribution to our success; big things are headed your way.

Thank you to the firm and our management team; you always want more from us and we always want more from you. If we both deliver, we both will win.

Thank you to our colleagues who assisted our clients or referred us their clients; when we collaborate, everyone is better off.

Thank you to our clients; the trust you place in us is our motivation. This year was a positive one; thank you for sharing your positive feedback. We want to build on this, we aim to do even better as we partner with you in your financial and life journeys.

Thank you to everyone that reads our Wrap Up; we write this every week because we value communication and education. This is also something very satisfactory for me so a second thank you for allowing me to share my thoughts in this manner.

On behalf of LD Wealth, we want to wish everyone a Happy Holiday, a Merry Christmas, and a Happy New Year.

We’ll return on January 10th.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of BMO Nesbitt Burns Inc. (“BMO NBI”). Every effort has been made to ensure that the contents have been compiled or derived from sources believed to be reliable and contain information and opinions that are accurate and complete. Information may be available to BMO Nesbitt Burns or its affiliates that is not reflected herein. However, neither the author nor BMO NBI makes any representation or warranty, express or implied, in respect thereof, takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. This report is not to be construed as an offer to sell or a solicitation for or an offer to buy any securities. BMO NBI, its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. BMO Nesbitt Burns Inc. and BMO Nesbitt Burns Ltee/Ltd. ("BMO Nesbitt Burns") will buy from or sell to customers securities of issuers mentioned herein on a principal basis. BMO Nesbitt Burns, its affiliates, officers, directors or employees may have a long or short position in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. BMO Nesbitt Burns or its affiliates may act as financial advisor and/or underwriter for the issuers mentioned herein and may receive remuneration for same. A significant lending relationship may exist between Bank of Montreal, or its affiliates, and certain of the issuers mentioned herein. BMO NBI is a wholly owned subsidiary of BMO Nesbitt Burns Corporation Limited which is an indirect wholly-owned subsidiary of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Nesbitt Burns Corp. and/or BMO Nesbitt Burns Securities Ltd.