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Stock markets and the economy

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December 2023 - The Fed signals rate cuts in the United States

The global stock markets maintained the upward trend that had begun in November after the U.S. Federal Reserve (Fed) decided to keep interest rates unchanged in mid-December at its last meeting of the year. Fed officials even signalled rate cuts in 2024, according to projections released after the meeting. This prospect pushed the global equity indexes up to all-time highs as the markets increasingly priced in the idea of significant easing of financial conditions. Investors are betting on substantial rate cuts from the world’s major central banks in 2024.

Variation vs
Variation vs
Interest rate in Canada (%)
Key rate
Key rate 5.00 0.00 0.75
Commodities ($US)
Oil (WTI)
Oil (WTI) $71.89 -5.0% -10,6%
Gold $2,060.96 3,4% 13,7%
EUR/CAD 1.46 -1,2% 1,2%
JPY/CAD 0.01 1,9% -9,4%
USD/CAD 1.32 -2.7% -2,4%

Sources: Bank of Canada, Fundata, U.S. Energy Information Administration


3.9% (S&P/TSX Composite 31-12-2023)

The Canadian market ended the last month of the year with a 3.9% return, as measured by the S&P/TSX Composite Index. The return was due mainly to the decline in bond yields, stimulated by announcements from the Bank of Canada (BoC) and the Fed. BoC officials kept the key rate unchanged at their December meeting and disclosed that they were more optimistic about the inflation outlook.  Finally, all sectors except energy posted gains during the month. 

The Canadian bond market also benefited from this environment; it recorded a strong return for the second consecutive month, with the FTSE Canada Universe Bond Index advancing 3.4%.


1.7% (S&P 500 31-12-2023 in CAD)

The S&P 500 Index ended 2023 with a nine-week winning streak, its longest since 2004, and a monthly return of 4.5% in U.S. dollars. As already noted, the rally was fuelled by expectations of rate cuts in 2024. The information technology and financial services sectors contributed the most to the return, while the energy sector made no progress. 

Even so, the loonie’s strength against the greenback reduced the gains, such that the S&P 500 ended the month with a return of 1.7% for Canadian investors.


2.1% (MSCI Europe 31-12-2023 in CAD)

European equities also closed the year with gains. The MSCI Europe index posted a 3.4% return in local currencies on hopes that the major central banks would ease monetary policies in the coming year. The return was reduced to 2.1% in Canadian dollars. Industrials and financials contributed the most, while energy and consumer staples detracted the most.


1.7% (MSCI AC Asia-Pacific 31-12-2023 in CAD)

The MSCI All Country Asia Pacific Index ended the month with a return of 2.3% in local currencies and 1.7% in Canadian dollars. Information technology and materials contributed the most to the return, while communication services and consumer discretionary posted losses. From a regional perspective, the Australian market was the best performer, while the Chinese market subtracted value owing to a painful recovery in the manufacturing sector and a loss of investor confidence in its growth potential.


1.1% (MSCI Emerging Markets 31-12-2024 in CAD)

The results for emerging markets were more mixed in December in relation to the developed markets. The MSCI Emerging Markets Index returned 1.1%, in local currencies and Canadian dollars alike. India and South Korea contributed positively to the return, but China dragged the index down yet again. From a sector perspective, utilities and information technology ended the period with the largest gains while communication services and health care recorded the largest losses. 

Reading in progress:December 2023 - The Fed signals rate cuts in the United States


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