Wealth Outlook 2024 - Slow then grow

127 Wealth Outlook 2024 | Regional outlook North America: an emerging set of new opportunities Considerations • Investors should consider tilting equity exposures toward small- and mid-sized companies (especially growth) and early cyclicals. These are places to potentially find growth amid an economic slowdown and capture market leadership shifts as the Fed eases. • We believe this is a moment to lock in current high yields with investment- grade intermediate maturity bonds. • Focus on beneficiaries of US-China polarization, including areas of tech and tech-enabled industrial stocks. As the labor market cools along with slower growth, we believe the US unemployment rate will rise modestly. We also see the consumer price index (CPI) measure of inflation falling towards 2.0%. If our forecasts play out, these conditions should allow the US Federal Reserve (Fed) to lower rates in 25 basis point (bp) increments two to four times starting in the middle of the year. With growth and inflation both lower in 2024, and Fed easing likely ahead, we have penciled in 10- year Treasury yields falling to 3.50%-4.0% (from about 4.5% in late-November) and two-year yields (currently near 4.9%) crossing below 10-year yields: in other words, a classic steepening of the US yield curve (and the basis for one of Our top 10 high conviction potential opportunities on page 54 ) . We expect Canada’s economy to also soften in 2024, and for the Bank of Canada to undergo its own mid- year transition from tightening to easing. Still, risks remain. In addition to still-restrictive monetary policy, we will monitor potential labor strikes, fiscal polarization, the wars in Ukraine and the Middle East, energy shocks, low home affordability and the prospect for other unforeseen geopolitical events.