After an impressive year for markets in 2023, it was reasonable to assume that 2024 would provide more moderate returns. However, with economic growth remaining steady in many parts of the world, inflation moderating, and central banks starting to reduce short-term interest rates, capital markets surprised by performing exceedingly well for a second consecutive year.
Read on for a recap of capital market performance in 2024, our thoughts of what might lie ahead for investors in 2025, and a review of our firm highlights from the past year.
2024 Performance
Given our passive investment management philosophy, we don’t spend time analyzing the economic cycle or forecasting short-term returns for individual securities, sectors, or countries. Instead, we focus on long-term return assumptions for broad asset classes and construct model portfolios that we expect to generate efficient returns for our clients over time.
Despite our long-term focus, monitoring the performance of capital markets over shorter time frames helps assess whether investment returns are evolving consistent with long-term assumptions. Chart 1 outlines the returns for various asset class benchmarks in 2024 while Chart 2 demonstrates how combining those benchmark returns in different proportions – our model portfolios – impacted results last year:
As demonstrated in Chart 1, the past year was very rewarding for investors, with the majority of asset classes experiencing impressive returns. Similar to 2023, investors were well-compensated for holding almost any type of financial asset in 2024, be that cash, bonds, stocks, or gold. For more details on why this was the case, click/tap below to expand our commentary on 2024 capital market performance:
Chart 2 demonstrates that the performance of our model portfolios in 2024 obeyed the typical relationship between portfolio risk level and portfolio return, with higher risk portfolios experiencing better returns for the year than lower risk portfolios. While this relationship does not always hold year-to-year, investors willing to take on more investment risk are expected to be rewarded with higher returns over the long term.
5-Year Performance
We encourage investors to discount the year-to-year performance swings of capital markets and to instead focus on longer-term results. Charts 3 and 4 therefore present annualized capital market and hypothetical model portfolio performance over the past 5 years:
Most of the benchmark returns presented in Chart 3 were either relatively unchanged or improved for the 5-year period ending December 31, 2024 compared to the 5-year period ending in 2023. About half of the 5-year benchmark returns are currently tracking closely in line (i.e. +/- 2%) with our long-term capital market assumptions (represented by vertical blue lines in Chart 3), with the following notable exceptions:
Chart 4 demonstrates that the hypothetical 5-year performance of our model portfolios – presented for illustrative purposes only given that our official performance track record began April 1, 2021 (only 3 years 9 months ago) – obeyed the typical relationship between portfolio risk level and portfolio return, with higher risk portfolios experiencing better returns over the past five years than lower risk portfolios. Given the impressive returns experienced last year, the 5-year annualized returns for all model portfolios ending December 31, 2024 improved compared to the 5-year period ending in 2023.
Firm Highlights
2024 was a successful year for High Level Wealth Management as we continued to welcome new clients and grew the firm’s assets under management by 40% compared to December 2023. We are proud of the fact that most new clients find us through word-of-mouth referrals or by organically searching for alternatives to traditional wealth managers.
From an operational perspective, we completed several important projects in 2024:
- Subscribing to more sophisticated investment research software. The new tool offers more advanced features that improve our process for reviewing model portfolios, capital market assumptions, and investment products. It also provides access to a wide range of sustainability data to enhance our process for evaluating sustainable investment strategies.
- To best serve our growing clientele, we opened an office in the Ritchie Mill that provides a dedicated meeting space for in-person appointments.
- We developed a new “client profile” feature in the My High Level Wealth client portal that enables new clients to efficiently provide their personal information and enables existing clients to keep their personal information up to date. At review meetings throughout 2025, your advisor will assign you a task to review/update your client profile.
High Level Wealth Management has several priorities in 2025:
- Improving the user experience of our client portal on mobile devices. This project has been on the list for several years while we await some exciting improvements to the underlying platform on which the client portal operates. The improvements should be coming later in 2025, which will allow work to begin on enabling a better mobile experience.
- Converting several reports from standalone spreadsheets to interactive client portal modules.
- Introducing our services to more clients. It is hard to assess in advance what our maximum capacity will be for bringing on new clients, but we are always conscious of our limits and continually assess whether we can continue bringing on new clients without adversely affecting the level of service provided to existing clients. At this point we estimate that we are at about 60% of our ultimate capacity, so there is still a good amount of room to grow. If you know someone that might benefit from our services, please let them know about us.
Looking Ahead
Before looking ahead to 2024, let’s revisit how we concluded last year’s annual review:
As we move into 2024, a key question is how quickly inflation returns to target (i.e. 2%) and how this impacts central bank interest rate policy. Investors currently predict rate cuts to start in the first half of the year, which could be overly optimistic should the economy continue to perform above expectations and if inflation remains high as a result. There will also be a Presidential election in the United States in November, the outcome of which could have far-reaching implications for the world and capital markets.
As we now know, inflation returned to the Bank of Canada’s target, allowing for a 1.75% reduction of the policy interest rate by year end. Economic growth remained robust, particularly in the United States where optimism around technology and artificial intelligence supercharged investment returns last year. The re-election of Donald Trump in November created a surge of investor risk taking as the market anticipates fewer regulations, lower taxes, and a pro-America pro-business policy agenda in the years ahead.
As we move into 2025, a key question is the extent to which the incoming U.S. administration proceeds with any of the more extreme policies that Donald Trump campaigned on. The possibility of mass deportations, broad-based tariffs, and potential trade wars could quickly reverse the progress that has been made on reducing inflation. Additional tax cuts or government spending could balloon the already large U.S. budget deficit and drastically increase the country’s debt at a time when interest rates are elevated and some investors have started to question the long-term sustainability of the country’s finances. At the start of 2025 there is an abundance of optimism about the prospects for the economy and investment returns; however both corporations and governments will need to thread a very delicate needle in order to deliver results that match the market’s very high expectations.
Like most years, there are many risks and opportunities on the horizon, but trying to predict future outcomes is impossible. Instead, we remain confident that investors are best served over the long run by remaining fully invested in low-cost passively-managed portfolios that are suitable for their circumstances given their financial objectives and risk tolerance. That may seem like very basic advice, but it is advice that has undeniably served many investors well.
We wish everyone a prosperous year ahead and we look forward to playing a part in your continued success.