Wealth Outlook 2024 - Slow then grow

131 Wealth Outlook 2024 | Regional outlook North America: an emerging set of new opportunities FIGURE 3 North America fixed income yields Fixed Income Yields Current (%) US Bank Loan 9.70 US High Yield (HY) Preferreds 8.80 US HY Bond 8.61 US IG Preferreds 7.59 US IG CMBS 6.06 US IG Corp 5.81 US Agg 5.24 US Agency MBS 5.07 US TIPS 4.92 US Treasuries 4.73 US Munis 3.83 Source: Bloomberg and FactSet as of November 24, 2023. Please see Glossary for further information. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Please see Glossary for further information. Past performance is no guarantee of future results. Real results may vary. For investors still concerned about inflation, Treasury Inflation-Protected Securities (TIPS) pay a nominal yield plus the headline CPI rate and deliver a way to potentially hedge a portfolio against possible consumer price shocks. The current nominal yield is around 2.3% for most maturities over the rate that preserves purchasing power. For most high-income earners in the US, tax-exempt municipal bonds offer an interesting tax-advantaged yield that may pay more than even lower-rated investment grade bonds on a tax-equivalent basis. Investors interested in the strategies or concepts should consult their tax, legal, or other advisors, as appropriate. The rise of the balanced portfolio After seeing deep declines in both equities and fixed income returns in 2022 and a one-sided advance by equities in 2023, we think both sides of a 60/40 (stock/bond) portfolio may contribute positively in 2024-2025. (See Core portfolios could be ready to shine on page 34 . ) Currencies The US dollar rally which started in mid-2023 has given back some ground in November. This is partly because the Fed is likely to ease more aggressively than other central bank peers. Another reason is that betting on the US dollar had become a crowded trade as investors sought out “safe haven” assets amid uncertainty. The US has large trade and fiscal deficits that should further encourage the US dollar softening over time. We expect the Canadian dollar to strengthen as broader USD strength wanes.