Skip to main content

CC&L Private Capital’s first-quarter financial market report and outlook

April 10, 2024


Markets Overview

Equity markets started the year strong. Global stocks reached new highs and more stocks contributed to the market rally. Financials, energy and industrials all generated double-digit returns in the first quarter. This contrasts with last year where market returns were dominated by just seven large companies that enthralled investors.

Support for stocks has come as the market narrative shifted further away from the possibility of a recession towards a “soft landing”, in which economic growth slows but avoids contraction. Economic data this quarter has been in line with this view. The labour market has remained strong, which has supported consumption. Inflation has come down from high levels, albeit not in a straight line. And central banks have said they will cut rates later this year. On balance, this has been good for investor sentiment. Yet uncertainty remains. Given the resilience in growth it is not clear that inflation will continue to fall in the US and policymakers may wait longer to cut rates. We are also seeing increased divergences between the strong US vs Canada and Europe where growth is below trend.


Meanwhile, it has been a slower start for fixed income. Core bond returns were negative as bond yields moved higher. Volatility in yields were the result of markets assessing the amount of rate cuts that may come this year. At time of writing, the bond market is now expecting 0.75% in cuts in 2024, quite different than the 1.5% priced in at the start of the year. Short bonds and high yield generated better returns than core fixed income this quarter.

Portfolio Strategy

As the overall global economy has shown resilience, and financial conditions have improved, we have modestly increased portfolio exposure to more cyclical investments that can benefit if the economy remains supportive. From an asset allocation perspective, we are modestly overweight stocks vs. long-term targets. Within equities, we favour global stocks. Our global portfolio has benefited from being overweight many of the companies that have benefited from AI. While we continue to like these companies for their strong earnings growth potential, we are also well diversified across a broad set of investments that can benefit in different market environments. These include global small cap stocks and emerging markets where valuations are attractive and return prospects are strong on a longer-term basis.

In portfolios’ bond allocations we have been increasing exposure to corporate credit. This has occurred alongside significant work to enhance and broaden our investment platform within fixed income. Last year we enhanced our high yield bond offering to improve our ability to generate return and manage risk. We also introduced commercial mortgages as we saw both a current and long-term opportunity to increase portfolio yield while diversifying risk. This has been a source of solid returns in an environment where traditional fixed income has been volatile. This quarter we have added Emerging Market Credit to our platform. Here we can seek attractive yield premiums over traditional bonds. In fact, this area of the market has better company fundamentals than traditional high yield in North America* and we have structured the portfolio to eliminate direct currency risk that can come when investing outside of Canada.

These changes mark an evolution in how we manage portfolios as we seek not only to be invested in what has worked in the past but also allocate capital to the markets of tomorrow. We think this will improve portfolio returns and give us greater flexibility as we manage risks across markets. 

*Source: FortWood Capital LP.


Legal Disclaimer

This material, including any attachments, is provided for informational purposes only. This material is intended for the use of the recipient only and no matter contained herein may be separately used, disseminated, distributed, reproduced or copied by any means, in whole or in part without express prior written consent of Connor, Clark & Lunn Private Capital Ltd. (“CC&L Private Capital”). Certain information contained herein is based on information obtained from third-party sources that CC&L Private Capital considers to be reliable. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of capital may occur. All opinions, estimates and projections contained in this material constitute CC&L Private Capital’s judgment as of the date of this material, and are subject to change without notice. This material has been prepared without regard to the particular individual financial circumstances and objectives of persons who receive it and nothing in this material constitutes legal, accounting, tax or individually tailored investment advice. Readers should consult with independent professionals regarding their individual circumstances, as applicable. This information is not an offer to sell or a solicitation of an offer to buy any securities and is not to be used as a sales communication.

Third-party disclaimer

This material may contain information obtained from third parties such as: Merrill Lynch, Pierce, Fenner & Smith Incorporated (BofAML), S&P Global Ratings, MSCI, and Morningstar’s Wealth Forecasting Engine.

Source: Merrill Lynch, Pierce, Fenner & Smith Incorporated (BofAML), used with permission. BofAML permits use of the BofAML indices related data on an "As Is" basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Connor, Clark & Lunn Private Capital Ltd. or any of its products.

This may contain information obtained from third parties, including ratings from credit ratings agencies such as S&P Global Ratings. Reproduction and distribution of third-party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.

Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. MSCI makes no express or implied warranties or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. This report is not approved, reviewed or produced by MSCI.

Your Details

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Catherine Dorazio
Managing Director
Business Development

Loading animation
Your Details

Let's stay connected

Subscribe to receive our quarterly email update and stay connected with everything new that's happening at CC&L Private Capital.