Monday Market Minute | Dec 25, 2023

2024 outlook — the pivot year for Canadian private markets

What Moved

As 2023 closed, market consensus coalesced around a clear narrative for 2024: the BoC would begin cutting rates in Q2, delivering 75–100bps of reductions by year-end. Bond markets had already priced this scenario aggressively, with the 5-year GoC yield falling over 100bps from its October peak. The Canadian dollar traded near $0.75 USD, reflecting a balanced view of growth prospects. The TSX finished the year with modest gains, led by financials and technology, while energy lagged on moderating oil prices.

Why It Matters

The rate pivot would reorganize the Canadian private markets hierarchy. Private credit, 2023's champion, would see yields compress as base rates declined — the best of the golden era was likely past. Housing would emerge as the primary beneficiary, as lower rates improved affordability, unlocked sidelined demand, and supported development economics. PE and VC activity would recover as financing costs declined and the exit market thawed. The winning 2024 strategy would be to gradually rotate from the rate-beneficiary trades of 2023 toward the rate-cut beneficiary trades of 2024.

Signal to Watch

The timing and pace of the BoC's first cut — an early, decisive move would signal confidence in the inflation trajectory, while hesitation would suggest the Bank remained concerned about a reacceleration.

The Monday Market Minute is published weekly by Alts Insider for educational purposes only. It does not constitute investment advice. See our full disclaimer.