2025

MARKET
OUTLOOK
BLUE BOOK
GLOBAL MACRO GLOBAL MACRO OVERVIEW
OVERVIEW

Goldilocks triumphed
ASSET CLASS VIEWS –
AROUND THE WORLD

THEMES

over the bears

Electrification
Resources
Quantitative investing
Private Markets

ASSET MIX
RECOMMENDATIONS
Equities
SUMMARY POINTS
Fixed income Steve Locke
1 The inflation battle is over...for now. CIO, Fixed Income &
Multi-Asset Strategies

2 Expect monetary policy divergence.

3 Pockets of value remain in US market. Lesley Marks

CIO, Equities

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ASSET CLASS VIEWS –

Living in a fairytale
AROUND THE WORLD
Reflecting on the past year, it’s clear that investors experienced success across the board. With equity and bond
markets delivering strong returns, 2024 was a highly profitable year.
THEMES
Electrification The battle against the final phase of inflation appears to be largely won, opening
Resources the door to potential globally coordinated central bank easing. With inflation rates
declining in most major developed economies, the groundwork has been laid for
Quantitative investing a continuation of this favourable investment landscape for equities while the outlook
Private Markets for bond markets is more nuanced.

“
The rate cutting cycle began with the Bank of Canada, European Central Bank and
ASSET MIX the Bank of England all cutting policy rates in the second quarter, with the Federal
RECOMMENDATIONS
The battle against
Reserve eventually joining the rate cut party. From their 2024 peak in April, Canadian
Equities and US 10-year government bond yields dropped by more than 100 basis points

Fixed income
by late summer, before experiencing a rebound. Canadian bond investors were
rewarded with a modest yet positive 3% return on the FTSE Canada Universe Bond
the final phase
Index through October. of inflation appears
For equities, although the year began with the Magnificent Seven (Mag 7) dominating
stock market returns that is not how things ended, as investors began to rotate
to be largely won.
beyond the narrow confines of the Mag 7 towards broader areas of the market. This
group of mega-cap stocks peaked in early July and experienced negative returns
while the S&P 500 went on to reach new highs. Although there were periods of
volatility, (such as the two-day Japanese summer correction and next day reversal),
none of those concerns prevailed and global equities surged higher over this past
year with the MSCI World Index (in Canadian dollars) delivering a 23% return to the
end of October.
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The economic backdrop proved to be benign with regions like Canada, For the Federal Reserve, it was the combination of inflation trending
Europe and the UK continuing to experience the economic slowdown lower and a gradual weakening of the labour market that gave the
ASSET CLASS VIEWS – that began in 2023. This translated into flat or negative earnings growth green light to lower the Fed Funds rate (Figure 1). September’s 50 basis
AROUND THE WORLD for these regions. Ordinarily this would prove to be a bearish headwind point cut underscored for the market that the Fed is serious about
for these equity markets, but the second half rotation into interest maintaining the soft landing of economic growth. The US economy
sensitive names as rates fell, provided a boost to equities in areas continued to stand out from the crowd — achieving true “Goldilocks”
THEMES
outside of the United States, despite weaker relative growth. status with earnings growth maintained in the low double-digit range
Electrification that was projected at the start of the year.
For more interest-rate sensitive economies like Canada, the effect
Resources
of high interest rates has dampened economic growth substantially. Our decision to neutral weight equities and bonds was based on the
Quantitative investing Although real GDP growth has remained positive overall, when view that a moderation in tight monetary policy would be constructive
Private Markets factoring in the population growth rate, Canadian real GDP per for both bonds and equities. We held some reservations on the
capita has had a negative growth rate in most quarters since prospect for greater volatility because of the ongoing conflicts in
2022. This garnered attention from economists, investors and Ukraine and the Middle East, as well as the uncertainty surrounding
ASSET MIX journalists and prevailed as an overhang for the prospects of the the policy impact from the US election.
RECOMMENDATIONS Canadian economy.
Equities
Fixed income
Figure 1: Headline CPI inflation (YoY) US Canada Eurozone Japan UK

12%
10%
8%
6%
2.6%
4% 2.5%
2% 2.3%
2.0%
0% 2.0%
-2%
2014 2016 2018 2020 2022 2024

2025 MARKET OUTLOOK Source: Bloomberg, October 2024.

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ASSET CLASS VIEWS –

Outlook for 2025: Protecting the golden goose
AROUND THE WORLD
This year our attention was captivated by the projected outcome of the US election but given the historical
trend of robust equity markets in the fourth year of an election cycle, regardless of the outcome, this was
THEMES
just a distraction.
Electrification
Resources Now that election day has passed, it might take a while to determine what the
markets have already factored in. Nonetheless, Trump’s decisive victory is expected
Quantitative investing
to have potentially significant implications for geopolitical risks and trade flows, and
Private Markets for the outlook for various asset classes and sectors.

ASSET MIX
For the US bond market, the election outcome could produce some larger shifts
in government policies that in turn have the potential to change the US inflation
“
RECOMMENDATIONS and yield curve picture significantly. If tariffs are implemented widely, supply chain The Bank of Canada
Equities disruptions and higher US import prices are likely to resurrect inflation. Alongside
this, the lowering of tax rates and ensuing larger deficits are likely to steepen the may need to cut more
Fixed income
yield curve. Stricter immigration policies could tighten labour market conditions,
leading to higher wage inflation. If these policies are implemented as promised,
aggressively than
the Fed may abandon its rate cutting posture in 2025, opting to maintain or even
increase interest rates if inflation expectations rise.
the Federal Reserve
The outcome of the US election could have far-reaching impacts, as global economic
in 2025.
prospects for 2025 are being bolstered by an expected continuation of the monetary
policy stimulus from many central banks, and by the lagged effects of 2024’s actions.
With markets having embraced the idea that inflation is likely to remain contained,
central banks in slowing economies like Canada and the EU are expected to lower
policy rates much further. Canada’s economy may need rates to fall by more than
other G7 economies to stimulate a rebound in domestic demand and close the output
2025 MARKET OUTLOOK gap. This means that the Bank of Canada may need to cut more aggressively than the
Federal Reserve in 2025. Canadian bond yields are also more likely to decline relative

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to US yields. We expect this will put continued downward pressure on grounded in the fundamentals driving the state of the economy —
the Canadian dollar. earnings growth expectations, and the multiple we should pay for
ASSET CLASS VIEWS – those earnings. After the disruptions that arose from the pandemic
AROUND THE WORLD After a strong year of performance across the board in 2024, and associated recovery, runaway inflation and central bank
corporate bonds are still offering attractive yields to investors. tightening, we can expect to enjoy a more stable phase of economic
Corporate bond spreads in both investment grade and high yield growth. However, depending on the pace and degree of policy
THEMES bond markets are not forecasting any broad-based deterioration changes to be implemented by the Trump administration, estimates
Electrification in fundamentals. With Trump’s election to the Oval Office, we of global GDP growth rates for 2025 could see upward revisions in
should expect to see a deregulation agenda emerge and the policy the months ahead (Figure 2).
Resources
environment turn friendlier to banking. While corporate yield spreads
Quantitative investing are not cheap by any historical measures, maintaining an overweight At face value, the stable economic backdrop and our positive
Private Markets position with a bias toward higher quality is likely to reward credit outlook for corporate profits supports a bullish outlook for equities in
investors next year. the coming year. In addition, central bankers, feeling like they have
won the inflation battle, have turned their policy attention to boosting
ASSET MIX Looking forward to 2025, the global equity market is poised for a year economic growth with continued easy policy which should also
RECOMMENDATIONS marked by both opportunities and challenges. Our equity outlook is support equity returns.
Equities
Fixed income
Figure 2: Global GDP estimates 2022 2024 Estimated
Consensus estimates real GDP growth (YoY % change) 2023 2025 Estimated

5.2%
4.8%
4.5%
3.6% 3.5%
3.0% 3.1% 3.2% 3.1% 3.1%
2.5% 2.6%
2.1% 1.9% 1.8% 1.7%
1.3% 1.1% 1.2% 1.1% 1.2%
0.7%
0.4%
0.0%
US Canada Eurozone China Japan World

2025 MARKET OUTLOOK Source: Bloomberg, October 31, 2024.

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But this won’t be without risk and potential for heightened volatility. Although the last
inflation battle appears to be won, as discussed, another fight may be around the
ASSET CLASS VIEWS – corner with the onset of tariffs and onshoring contributing to a resurgence in inflation.
AROUND THE WORLD
We are also watching carefully the recent policy shifts from the Chinese government
which included monetary easing, reduced mortgage rates and support for stock
THEMES buybacks, as the outlook for Chinese economic growth has an outsized impact on
Electrification
Resources
global growth expectations. We believe that greater fiscal support will be needed to
offset the downward pressure from the property market in China but the recognition “
Quantitative investing
that the economy needs this policy support is undoubtedly a necessary condition for
a sustained upward move in Chinese equities. We believe that
Private Markets Turning to valuation, almost universally, markets are trading close to long- opportunity still
ASSET MIX
term historical average multiples, with one exception being the S&P 500. The
concentration of the US stock market in mega-caps and the large exposure to the
exists for capital
RECOMMENDATIONS technology sector hides the fact that there is still attractive value to be found in the
remaining “S&P 493” stocks and US small and mid-cap companies. While aggregate
appreciation
Equities
Fixed income
valuation may lead you to shy away from US equities, we believe that opportunity with careful stock
still exists for capital appreciation with careful stock selection. As we expect interest
rates to fall faster in the rest of the world, this should help support multiple expansion selection.
and in turn higher share prices in regions like Canada and Europe as well. With
the support of lower interest rates, cyclicality will be an important factor in sector
allocation across portfolios.

Despite the strength we’ve experienced in global equity and bond markets
over the past year, opportunities will still emerge across various asset classes.
However, challenges from potential inflationary pressures, geopolitical tension and
unforeseen risks remain key considerations for investors. To successfully navigate
this environment, adopting a balanced and diversified approach – spanning different
asset classes, geographies and sectors will help mitigate the effects of expected
2025 MARKET OUTLOOK market volatility and provide a more stable path forward for investors.

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GLOBAL MACRO
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Asset class views –
around the world
ASSET CLASS VIEWS –
AROUND THE WORLD

THEMES
Electrification
Resources
Quantitative investing The past year was one of rapid recovery from
Private Markets the global inflation shock. In 2025, the markets Rajan Bansi
will require a more selective approach. VP, Investment Strategy &
Portfolio Solutions
ASSET MIX Our portfolio managers weigh in on fixed income and equities
RECOMMENDATIONS from around the world, providing their insight into how the current
Equities environment will unfold. This includes the interplay between major
economies and potential divergence in monetary policy.
Fixed income

CONTR I BUTOR S
William Aldridge Hadiza Djataou Shah Khan Nick Scott
SVP, Portfolio Manager & Team Co-Lead, VP, Portfolio Manager, VP, Portfolio Manager & Team Co-Lead, SVP, Portfolio Manager & Team Lead,
North American Equity & Income Team Mackenzie Fixed Income Team Mackenzie Bluewater Team Mackenzie Asia Team

Konstantin Boehmer Seamus Kelly Katherine Owen Richard Wong

SVP, Portfolio Manager & Team Lead, SVP, Portfolio Manager & Team Lead, VP, Portfolio Manager, SVP, Portfolio Manager & Team Lead,
Mackenzie Fixed Income Team Mackenzie Europe Team Mackenzie Global Equity & Income Team Mackenzie Cundill Team

2025 MARKET OUTLOOK

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Canadian fixed income
AROUND THE WORLD
Konstantin, what are your thoughts about the Canadian Could the BoC already be behind the curve?
economy as we enter 2025? Konstantin: Yes. The economy is weak and inflation is already at the
THEMES Konstantin: I think there are worrying signs that point to economic midpoint of the Bank’s target range. But, at the start of Q4, inflation
Electrification growth slipping. On an aggregate basis, growth has been decent, but was actually running at 1.1% if we stripped out mortgage interest costs.
Resources immigration has been a powerful tailwind. On a per capita basis, which We think the Bank still might be underestimating potential economic
is what people feel, we are already in recession. There are multiple challenges, and it may need to implement more drastic measures that
Quantitative investing areas of stress in the economy that will play out in some way in 2025. could, potentially, reduce the benchmark policy rate to 2% or less by
Private Markets the end of 2025.
How do you think the Bank of Canada (BoC) views
ASSET MIX the current economic situation? What’s the role of housing in a potential recession?
RECOMMENDATIONS Konstantin: Up until the October meeting, the Bank seemed Konstantin: Very high — 2025 is a big year for mortgage renewals
reasonably comfortable in their position with measured 25 basis point and let’s see how that plays out on the household balance sheet.
Equities
cuts. But they changed their tune with a 50 basis point cut at the But housing is more than people renewing mortgages. It’s the role of
Fixed income October meeting. developers and the construction industry. There’s a trickle down to
real estate agents, notaries and other professionals in the ecosystem.
I don’t think 100 basis points of lower rates will just magically turn
this around.

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Canadian equities
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Shah, what are your thoughts about the Canadian where the consumer is trading down and/or looking for value.
economy as we enter 2025? Dollarama and Loblaw are names that look compelling.
THEMES Shah: I share a lot of the concerns Konstantin expressed.
Electrification The consumer represents the largest part of the economy and they’re Will, which sectors do you find are the most attractive right now?
Resources in a tougher spot compared to their US counterparts. The Bank of Will: It’s really a stock specific market. The S&P/TSX Composite Index
Canada has commenced its easing cycle, but it takes time for this is trading near the midpoint of its historical valuation range. On the one
Quantitative investing relief to be felt in the broader economy. hand, this suggests multiple expansion is possible if declining interest
Private Markets rates lead to continued money flows into equities. But, on the other
Shah, what do you think about the Big 6 Banks in Canada hand, slowing growth in earnings may serve as an offset.
ASSET MIX with respect to mortgage renewals?
RECOMMENDATIONS Shah: The Canadian banks are best of breed globally but in this What’s the risk/reward profile right now from
environment, you have to be selective about the names you own. your perspective? (We explore resources from a thematic
Equities perspective with Benoit Gervais in this publication.)
Unsecured portfolios such as credit cards, personal lines of credit,
Fixed income or even automotive loans are where we could see delinquencies Will: At the end of 2024 we’re seeing a geopolitical risk premium
increase and we are starting to see an uptick given the strain on the priced into certain commodities, particularly oil and gold. Oil is
consumer. A name we like is RBC. They have consistent underwriting likely to remain rangebound given the demand/supply dynamic.
standards throughout the cycle. They have a strong wealth Demand growth has softened in 2024, particularly in China,
management franchise, which is one of the most attractive parts of but policymakers have recently announced stimulus efforts to
the business as it’s a higher ROE, higher fee income, lower capital strengthen their economy.
intensity platform. Plus, they have the strongest deposit franchise
which lowers overall cost of funding. What’s your view on gold?
Will: Declining interest rates, continued geopolitical uncertainly,
What is your perspective on consumer stocks as we enter 2025?
stronger energy prices and a weaker US dollar are supportive of gold
Shah: We’ve been cautious about discretionary spending, particularly prices. But high prices will eventually constrain demand, whether that
2025 MARKET OUTLOOK big-ticket items. Companies in that camp like BRP or Canadian Tire be from individual investors or central banks.
face headwinds and lack catalysts. Conversely, there are opportunities

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ASSET CLASS VIEWS –

Global fixed income
AROUND THE WORLD
Konstantin, what are your thoughts about the central What’s holding back growth in core Europe?
bank policy in the US? Hadiza: Germany’s heavy reliance on China for trade is a key factor.
THEMES Konstantin: It’s a very different situation versus Canada. Inflation As one of its largest trading partners, China’s slower growth has been
Electrification is running higher and is looking stickier, especially with respect a drag on Germany’s exports. However, Germany has fiscal space
Resources to services. The Fed has expressed concern about the labour to stimulate its economy, and there is growing political pressure
market, but the economy is still consistently creating jobs, albeit to move away from its fiscal conservatism. That’s in contrast to
Quantitative investing at a slower pace. France, which has a fragile fiscal situation and is at risk of a ratings
Private Markets downgrade in 2025.
Is there a risk of cutting too much and reigniting inflation?
ASSET MIX Konstantin: Yes, I think it’s a risk and that’s why the Fed doesn’t need
Let’s move over to Asia and talk about Japan,
which is actually raising rates.
RECOMMENDATIONS to be as aggressive as the market has been pricing in. The more you
cut, the greater the chance of inflation coming back. Hadiza: Japan struggled with persistently high inflation through 2024,
Equities
particularly due to imported inflation and a weaker yen. The Bank
Fixed income Hadiza, what can we expect from Europe’s economy in 2025? of Japan is likely to continue its gradual rate-hiking cycle into 2025.
Japan’s policy shift could have broader implications for global markets
Hadiza: Europe represents a stark contrast to the US as well.
— especially if the Japanese yen appreciates materially or yields on
Financial conditions are restrictive for the consumers and corporates,
Japanese government bonds rise, as we saw in August 2024.
and there is a need for lower rates. If economic data softens
further at the start of 2025, the European Central Bank may adopt
a more accommodative stance if core inflation remains well below What about the emerging markets?
the 2% target. Hadiza: I remain optimistic about select emerging markets, particularly
in Asia. We could see dollar depreciation in 2025 as the Fed cuts
rates, which would provide a tailwind for emerging market currencies.
Second, Chinese stimulus measures, particularly fiscal and credit
support, could have knock-on effects for trade-dependent neighbours.
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ASSET CLASS VIEWS –

US equities
AROUND THE WORLD
Katherine, how should we think about Richard, as a value investor, how do you feel about
the US equity landscape? the consumer space?
THEMES Katherine: Markets are telling us the Fed has so far been successful Richard: We like consumer cyclicals. I’ll share examples linked to
Electrification in the mitigation of recession risks. Falling rates, a healthy labour housing because that’s a space we like. Millennials are now in the
Resources market and slower inflation should provide a constructive backdrop family formation life phase and also in their high-income earnings
for stocks. years. There’s a shortage of homes in the US. We like DR Horton,
Quantitative investing which is a leader in entry level homes. The stock has a low valuation,
Private Markets What are you seeing in terms of the US consumer? and the company will benefit from stronger demand as rates fall. We
also think lower rates will spur greater home improvement spending.
Katherine: Aggregate consumer spending has surprised to the
This is in part why we like Lowes, which has lagged its main rival,
ASSET MIX upside. Wealthier households continue to do well and I think this will
Home Depot, and trades at an attractive valuation.
RECOMMENDATIONS continue into 2025. On the lower end of the income scale, we can
see clear signs of retrenchment and trade down. Recent management
Equities What else do you like?
commentaries from McDonald’s and Dollar General corroborate the
Fixed income view that consumers are focusing more on essentials and eschewing Richard: You may be surprised to learn we are finding value
discretionary items. opportunities in technology stocks linked to AI. As the AI application
build-out continues, many companies will need greater processing
What are you looking for in a stock given this backdrop? power, networking equipment and storage. We’re finding stocks
exposed to the AI spending cycle in networking and storage trading
Katherine: We’re looking for company specific stories where the
at less than 10x earnings. Western Digital is a name we like. The
returns more than offset the idiosyncratic risk because it’s these
company manufactures the hard disk drives needed in data centres
returns that add value to a portfolio. The US equity landscape
to store the enormous amounts of data feeding large language
has become a stock picker’s market as rates have risen from the
models (LLMs).
COVID lows. Walmart is doing very well, as is Costco, which is more
upmarket but hardly a luxury name. Yet, other household names
such as Starbucks, Nike and Lululemon have struggled.
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ASSET CLASS VIEWS –

European equities
AROUND THE WORLD
Seamus, what are your thoughts about the investment has strengthened our confidence in the potential of this opportunity.
opportunities in Europe for the next 12 months? In the consumer space, Inditex, the parent company of brands such as
THEMES Seamus: Germany’s economic model, which relied on importing
Zara, stands out for its highly efficient sourcing model, which allows
Electrification them to deliver fashionable yet affordable clothing. Within financials,
cheap energy for manufacturing goods for export to China, has been
Munich Re, the world’s largest reinsurance company continues to
Resources disrupted at both ends. France saw its economic momentum slow in
demonstrate solid financial performance supported by favourable
the second half of 2024 with political uncertainty likely to persist into
Quantitative investing industry pricing.
2025 and continue to weigh on sentiment. The peripheral economies
Private Markets have performed much better on a relative basis, but ultimately
Europe needs improved performance from the core countries for Richard, as a value investor, what do you see in Europe?
the region to grow at trend. Yet valuations are at relatively low levels Richard: We like select European industrials because they are cheap
ASSET MIX across the region. and sensitive to a rebound in Chinese economic growth that should
RECOMMENDATIONS materialize with recent stimulus announcements. Siemens, which sells
Equities Are there any bright spots? equipment to factories all over the world, is poised to benefit. It’s the
Fixed income world’s digital factory leader. Software driven controls and automation
Seamus: The UK. We have a combination of slowing inflation, falling
are needed in every factory and Siemens is a technology leader in this
interest rates and rising real wages, while housing is firm. Equity
regard. Add in resilient US demand and rate cutting cycles in many
valuations are a significant discount to long-term averages and
major economies and the backdrop is positive for the company.
stabilization on the political front is creating opportunity. We want
domestic exposure, so we own some of the home builders. Taylor
Wimpey is such a company, and it is benefiting from improving What’s another name you like?
affordability as mortgage rates fall and real wages rise. Richard: Daimler Trucks. Daimler is a world leader in industrial
commercial trucks and the company’s stock is very cheap.
Which sectors look attractive? The company is poised to not only benefit from higher industrial
activity, but also from the theme of electrification. As environmental
Seamus: We see pockets of opportunity in health care, consumer
regulation gets tighter around the world, they will also benefit
names and financials. In health care, we hold UCB, which has made
because they’ve established themselves as the leader.
2025 MARKET OUTLOOK significant strides in developing treatments for psoriasis. Our research,
along with insights from medical professionals we’ve consulted,

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ASSET CLASS VIEWS –

Asian equities
AROUND THE WORLD
Nick, what are your thoughts on China’s recent What’s an Asian emerging market that you’re bullish on?
stimulus initiatives? (Stock picking within the emerging markets is explored
THEMES Nick: Many longer-term structural issues remain. But the stimulus in by Arup Datta in a thematic piece we’ve included in
Electrification September is the most coordinated response we have seen. Use of this publication.)
Resources central government debt to help local governments’ balance sheets Nick: India. This is a multi-year story and one of the best equity
and to buy housing inventory is a positive initiative. stories in Asia. Prime Minister Modi may have a weakened
Quantitative investing coalition, but it’s still one focused on reform and infrastructure-led
Private Markets Do you feel like there could be more stimulus? development. Investors might be wary of valuations in the short-term,
but the country is on the cusp of becoming a manufacturing export
Nick: Yes. There are various policy meetings through the balance
powerhouse over the next decade.
ASSET MIX of 2024 including a Politburo gathering in December that will
RECOMMENDATIONS likely bring additional policy measures. One desirable outcome
would be to restore confidence of the Chinese consumer who
Equities
has increased savings and lost confidence in residential housing
Fixed income as a store of value.

What do you think Canadian investors don’t appreciate

about Chinese companies?
Nick: The maturation of corporates, with many cutting costs, pairing
back marginal investments and employing appropriate capital return
policies. For example, Alibaba has become an attractive value
proposition by shrinking its equity base by 8% in 2024. Trip.com
which is China’s dominant online travel agency, cut costs during
COVID so the company is now very lean with huge operating
leverage. The company has unparalleled customer service with
2025 MARKET OUTLOOK a lower cost base versus global players and is successfully expanding
throughout Asia.

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 What’s in store
GLOBAL MACRO
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for 2025?
ASSET CLASS VIEWS –
AROUND THE WORLD

THEMES
Electrification
Resources
Quantitative investing The markets will be guided by key themes in 1 The grid: overlooked and underinvested.
Private Markets 2025, with some convergence among these.
Electrification of the global economy is expected to build momentum,
2 Resources to gain from multiple tailwinds.
ASSET MIX but distribution remains challenging. We believe this will fuel greater
RECOMMENDATIONS demand for resources, as will geopolitical concerns. With change in 3 A quantitative approach to shifting markets.
Equities the air, our investment leaders discuss how these macro themes will

Fixed income
affect their areas of focus. We also look at the growth of quantitative 4 Private markets have become more accessible.
investing as a means to identify opportunities, regardless of the market
environment, as well as what is driving growth within private markets,
ranging from equity and credit to infrastructure.

C ONTR I BUTOR S
John Cook Arup Datta Benoit Gervais Northleaf Capital Partners
SVP, Portfolio Manager & Team Co-Lead, SVP, Head of Team, SVP, Portfolio Manager & Team Lead, Private Markets
Mackenzie Greenchip Team Mackenzie Global Quantitative Equity Team Mackenzie Resource Team

2025 MARKET OUTLOOK

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ASSET CLASS VIEWS –

The grid: overlooked and underinvested
AROUND THE WORLD
As we enter 2025, the electrification of the global economy remains a compelling investment theme. In fact,
we believe this theme has a multi-decade runway for growth, driven by a shift to a low carbon economy.
THEMES
Electrification The International Energy Association (IEA), in its base case scenario, Electrification was always going to be the lynchpin of the energy
projects total global electricity demand to reach 54,000 TWh in transition, so it is encouraging that annual investment has been
Resources
2050,1 more than doubling from 25,000 TWh in 2021. Investors trending higher for almost a decade. However, what the market may
Quantitative investing seeking opportunities in the electrification theme can choose from not have fully factored in is that new energy sources and new end
Private Markets sectors across its supply chain, ranging from cable/wire providers and uses will require an upgraded transmission grid. The world’s aging
equipment suppliers to utilities and engineering firms. Opportunities electricity grids, built during a time when the world ran mainly on
also abound in infrastructure requirements (such as charging stations) large, centralized electricity generation, will require significant capital
ASSET MIX and manufacturers of in-demand products (such electric vehicles and spending to meet this need. The stakes are high. The grid requires
RECOMMENDATIONS heats pumps). a bigger slice of the investment pie than it is getting and has now
Equities become a bottleneck for new renewable connections.
Fixed income

Figure 3: Miles of 345 Kilovolts (KV)+ transmission lines added each year in the US 345 KV 500 KV

4,000

3,000

2,000

1,000

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
2025 MARKET OUTLOOK
Source: Data is based on Grid Strategies analysis of FERC, Office of Energy Projects, Energy Infrastructure Updates.

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While investments in renewable energy have nearly doubled since 2010, global
investment in grids has not kept pace, remaining barely changed at around
ASSET CLASS VIEWS – $300 billion annually.1 According to the IEA, this figure will need to increase to about
AROUND THE WORLD $600 billion by 2030, and then reach $800 billion per annum over 2040-2050,1 to
power growing electricity demand globally. There are currently over 1,000 gigawatts
THEMES of advanced-stage renewable energy projects waiting for a grid connection, as per
the IEA2 and the main reason for the holdup is the lack of transmission.
“
Electrification
Wind and solar projects are often located far from populated areas and require
The grid requires
Resources
a significant build out of transmission lines to deliver the power they generate. a bigger slice of
Quantitative investing
Private Markets
Investment in transmission lines, which has only expanded at around 1% per year
over the last decade, needs to more than double to 2.3% per year based on a the investment pie
recent Princeton University study (Figure 3).3 Encouragingly, in the past year we
have observed that large power utilities are already shifting capital expenditure
than it is getting
ASSET MIX
RECOMMENDATIONS
(CAPEX) from renewable installations to transmission and distribution. Our belief and has now become
that the attractiveness of the risk-adjusted return on grid investments is shared by
Equities utility executives. a bottleneck for
Fixed income The Mackenzie Greenchip team has been investing in grid suppliers and operators new renewable
since the foundation of our team, as it is essential to integrating new renewable
electricity supply and to the environmental case for the electrification of transport connections.
and other energy-intensive industries. About one-third of our portfolio is currently
exposed to direct grid investment. In our view, investments into high, medium and
low voltage infrastructure must keep pace with each other to avoid exacerbating
system imbalances. While investor attention has disproportionately focused on
low and medium voltage opportunities so far, we note that our utility holdings are
directing more CAPEX to high voltage equipment which is increasingly backordered,
in some cases by as much as four years.

2025 MARKET OUTLOOK 1. Source: Net Zero by 2050 – Analysis - IEA

2. Source: Lack of ambition and attention risks making electricity grids the weak link in clean energy transitions - News - IEA
3. Source: https://repeatproject.org/docs/REPEAT_IRA_Transmission_2022-09-22.pdf

17
 THEME 1 ELEC TR I FI CATI ON
GLOBAL MACRO
OVERVIEW
We invest in several attractively valued companies that are mainly (which ranks third in the world) are following suit. The team also
focused on the higher voltage space, including Siemens Energy, added Nexans, one of the largest transmission cable manufacturers
ASSET CLASS VIEWS – Hitachi and Mitsubishi Electric Corporation. In the case of Siemens in the world, to the portfolio in early 2024.
AROUND THE WORLD Energy, the world’s second largest provider of such equipment (after
Hitachi-ABB, both of which are Greenchip investments), the order Electrification is an attractive multi-decade investment theme, with
backlog has more than doubled since 2021 and is equivalent to an incredibly rich and diverse set of investment opportunities with
THEMES multiple entry points and the potential to diversify risks and potential
two years of sales at current rates. The company recently raised
Electrification its guidance for revenue growth in its grid division to a range of 32%- returns. However, not all stocks will be long-term winners. Greenchip
34% and is investing in a new transformer manufacturing facility in will continue to focus on attractively valued companies in the space
Resources
Charlotte, North Carolina. Hitachi-ABB and GE spin-off Vernova and avoid over hyped stocks which trade at higher valuations without
Quantitative investing the backing of solid fundamentals.
Private Markets

ASSET MIX
RECOMMENDATIONS An allocation to Mackenzie Greenchip strategies helps provide:
Equities
• Diversification of country exposure • Direct exposure to the energy • Ballast for portfolios
Fixed income within equity allocation of portfolios. transition mega-trend. that possess a growth tilt.

2025 MARKET OUTLOOK

18
 THEME 2 R ESOUR C ES
GLOBAL MACRO
OVERVIEW

ASSET CLASS VIEWS –

Resources to gain from multiple tailwinds
AROUND THE WORLD
There’s no better spot than gold to begin our 2025 outlook on resources. We believe that many of the factors
that underpinned demand for gold in 2024 will prove durable through 2025 and perhaps beyond.
THEMES
Electrification To start, Russia remains at war with Ukraine. For some investors, this type of
geopolitical risk is enough reason to own more gold. But the war has resulted in
Resources
significant economic sanctions against Russia that include its banks being excluded
Quantitative investing
“
from the Society for Worldwide Interbank Financial Telecommunications payments
Private Markets system (SWIFT) and a freezing of the foreign reserves of the Central Bank of the
Russian Federation, representing nearly 50% of its total reserves. These sanctions
have resulted in some expected consequences, such as Russia looking for dollar From gold to natural
ASSET MIX
RECOMMENDATIONS
alternatives to trade, and some unexpected consequences, such as China taking
steps to reduce its exposure to US dollars.
gas and lumber,
Equities
China must look toward the West with a feeling of trepidation. Rising trade barriers we expect resources
Fixed income and a repatriation of manufacturing production by the West, a long-term theme
we describe as onshoring, have hurt growth. But the freezing of Russia’s US dollar
and resource
assets was likely the impetus for policymakers in China to diversify its own reserves, equities to be
lest it be subject to similar restrictions in the future. Gold purchases by China’s
central bank, the People’s Bank of China, slowed in the summer of 2024 after robust well-bid in 2025.
purchases in April and May, but we believe this pause may prove temporary. The rise
of an alternative currency to the US dollar is not only in the interest of China, but also
many other countries, including Russia and Iran. There simply aren’t many safe fiat
currencies available in size to satisfy China’s needs and this has led to our belief that
gold should have a strong demand driver into 2025.

2025 MARKET OUTLOOK

19
 THEME 2 R ESOUR C ES
GLOBAL MACRO
OVERVIEW
Lastly on gold, central banks are generally in an easing cycle across liquified natural gas (LNG) terminals come online, providing the
much of the developed world. Direction matters more than level. We ability to meet strong overseas demand. Demand growth for natural
ASSET CLASS VIEWS – can’t predict the level where rate cuts will end but an easing cycle gas could be double the growth rate of GDP, which is significantly
AROUND THE WORLD itself is positive for gold prices. Real interest rates in the US are higher than most other resources that generally run at growth rates
currently in excess of 1.5%. Arguably, this level is restrictive and the US much lower than that pace. The demand for this energy source
Federal Reserve could cut rates such that they fall to a range of 1%- seems insatiable as Europe seeks to diversify away from coal, and
THEMES
1.5% in an attempt to avoid a recession. Compensation from holding Japan and China strive to meet their energy needs. LNG Canada is
Electrification US dollars falls as rates decline, which is yet another reason investors set to open its terminal in Kitimat, British Columbia by the middle of
Resources may look to gold, given it is independent of the economic cycle and 2025, with other terminals set to come online in the US by 2026 in
doesn’t have earnings or falling income. Plaquemines, Louisiana and Corpus Christi, Texas.
Quantitative investing
Private Markets Natural gas is another resource with a bullish underpinning as we In our view, domestic demand should remain robust as the energy
enter 2025 (Figure 4). The Mackenzie Resource team believes that transition, as well as data centres equipped to meet the demand from
North America is on the precipice of a major shift in supply, as multiple AI applications, require ever greater energy sources. Currently, North
ASSET MIX
RECOMMENDATIONS
Equities Figure 4: Net generation for all sectors Coal Gas Nuclear Hydro Wind Solar Other
Fixed income 6
Growth
Stagnation
Billions of megawatt hour

0
2001 2005 2009 2013 2017 2021 2025 2029 2033

Source: SSR, LLC; BNEF; Mackenzie estimates.

2025 MARKET OUTLOOK

20
 THEME 2 R ESOUR C ES
GLOBAL MACRO
OVERVIEW
American operators can break even at $3 gas prices. We believe the start of 2024. The supply/demand fundamentals of copper have
there’s a case to be made that, by 2026, we could see gas prices resulted in the floor for copper prices moving from $2.50 (USD) less
ASSET CLASS VIEWS – consistently at the $4 level, which would allow many companies to than 10 years ago to about $3.50 today. Longer-term, we believe we’re
AROUND THE WORLD generate significant earnings and cash flow. The jump to $4 gas will not on a journey to a $5 floor on copper but that may not happen overnight.
happen overnight but the backdrop heading into 2025 is constructive. In fact, it may not happen in 2025. We might trade at $5 in 2025, but
we probably won’t have prices consistently north of that, which would
THEMES Oil is one resource that will likely remain rangebound. The incentivize new mine investment next year. But we will eventually get
Electrification geopolitical risk premium jumped in early October, and we saw to that level. When we finally get to a place where the US, China and
West Texas Intermediate (WTI) push north of $70 (USD). But, from Europe are all growing at a healthy clip, we expect a new price range
Resources
an overall fundamental perspective, there’s a lot of potential supply for copper between $5 and $7, and 2025 will be a place in that journey.
Quantitative investing both inside and outside of OPEC that could come online. We see
Private Markets demand remaining stubbornly low and as a result WTI may likely Closing our outlook on resources with lumber, which is tied to the US
stay rangebound between $65-$80, barring a hard landing of the housing market, we believe lumber is poised to have a great year,
economy or a strong rebound. provided we see sufficient economic growth south of the border,
ASSET MIX because lower rates are going to help unlock pent up demand. Higher
RECOMMENDATIONS Two final areas of the resource market that are going to be front and rates post COVID-19 hurt housing affordability, but 30-year mortgage
centre in 2025 are copper and lumber. Copper demand has been rates in the US are down nearly two full percentage points from the
Equities running at one time GDP and we believe that pace likely to increase peak. That represents a significant level of savings on mortgage
Fixed income to two times global GDP. Copper is the cheapest, most efficient way payments. Combine those lower rates with wage gains on the
to carry electrons and the longer-term themes of the energy transition demand side, along with tight supply, and we have the recipe for new
and onshoring are very bullish for copper. Copper prices have come housing starts and associated demand for key inputs such as lumber.
down from the highs for the year but are still up approximately 15% from

An allocation to Mackenzie Resources provides:

• A core building block for resource • Access to active management which seeks • Full coverage of resource
allocation within Canadian equities. opportunities for alpha, which are a function industries exposure owing to global
2025 MARKET OUTLOOK of idiosyncratic risk and market inefficiency. investment approach.

21
 THEME 3 QUANTI TATI VE I NVESTI NG
GLOBAL MACRO
OVERVIEW

ASSET CLASS VIEWS –

A quantitative approach to shifting markets
AROUND THE WORLD
What a time to be a stock picker. We believe that 2025 will likely bring rate cuts across much
of the developed world and yet growth rates across these countries will vary widely.
THEMES
Electrification Some countries such as Canada and Germany may slip into recession, while the US
will likely hum along at a decent pace of growth. Dispersion in emerging markets will
Resources
be no less stark. India will continue along its secular growth path, but investors will

“
Quantitative investing likely wrestle with valuations. Meanwhile, in China, investors will have to determine if
Private Markets stimulus measures announced in 2024 are enough to shore up consumer activity and
to what extent this is reflected in valuations.
This normalization
ASSET MIX
RECOMMENDATIONS
As stock pickers who utilize a quantitative approach, we expect 2025 will be as good
a year as any. Our investment process is designed to be a core, all-weather solution of interest rates,
Equities
built to thrive in all these scenarios. We believe stock markets are driven by different
styles — value, growth and quality — at different times. Our quant models utilize
has real economic
Fixed income factors that allow us to identify the best ideas, and we trade on them, daily. implications for
Investors familiar with our commentaries will know we congratulate those who have
been overweight US large cap equities, especially large cap growth names, for the
corporations and
better part of the last 15 years. But they’ll also know that we’ve been encouraging
investors to adjust positioning now, because the next 15 will be different from the
investors alike.
past 15. Let the new year of 2025 be another impetus to act. There are two reasons
to believe we are likely in the midst of a regime change in equity markets.

First, while the Federal Reserve Board is in the midst of an easing cycle, we are not
expecting a recession in the US, nor are we expecting a return to the ultra-low rates

2025 MARKET OUTLOOK

22
 THEME 3 QUANTI TATI VE I NVESTI NG
GLOBAL MACRO
OVERVIEW
we experienced for so long coming out of the financial crisis. approach allows us to assess a broader universe and trade in a timely
This normalization of interest rates, on its own, has real economic manner. We are not bears on the Magnificent 7 — these companies
ASSET CLASS VIEWS – implications for corporations and investors alike. generate enormous amounts of free cash flow and have strong moats.
AROUND THE WORLD We aren’t making a call on these businesses as we enter 2025,
Second, and perhaps overlooked by many individuals, is how but instead are pointing out that the gap in returns is unlikely to repeat
inexpensive equities across much of the globe have become as the itself going forward.
THEMES “Magnificent 7” gobbled up so much capital because rates were so
Electrification low for so long (Figure 5). In early October 2024, many investors Our ability to uncover investment opportunities based on factors
were surprised by the sharp rise in Chinese equities on the heels linked to value, growth or quality extends beyond developed markets.
Resources
of stimulus measures announced in late September. While that’s Our models assess a universe of 10,000 emerging and frontier
Quantitative investing understandable, few were talking about how cheap Chinese stocks markets, twice, every single day. We are investors focused on alpha
Private Markets had become, with many trading at less than 10 times forward earnings. generation and this represents a significant advantage given this
part of the universe is large, varied and much less efficient. Let’s
But on this point, we didn’t need to invest heavily in China. US small compare two countries — India and Korea — to show the advantages
ASSET MIX caps have been under-loved for years and there are several terrific of a quantitative approach.
RECOMMENDATIONS businesses trading at very attractive valuations. A quant-based
Equities
Fixed income
Figure 5: Relative P/B valuation US Large Cap/US Small Cap US Large Cap/Emerging Markets Large Cap

0
2000 2004 2008 2012 2016 2020 2024

Source: Mackenzie Investments.

2025 MARKET OUTLOOK
Represents the investable universe by region for the Mackenzie Quantitative Equity Team. Relative price/book data from December 1999 to August 2024.

23
 THEME 3 QUANTI TATI VE I NVESTI NG
GLOBAL MACRO
OVERVIEW
On the surface, some market watchers look at India and conclude it’s to utilize in 2025 and beyond. The factors we utilize in our process
an expensive market. We can understand that, but as stock pickers are not static. In recent years we have incorporated machine learning
ASSET CLASS VIEWS – we would observe it’s looked expensive for quite some time and that, and natural language processing (NLP) techniques to develop new
AROUND THE WORLD on its own, is not a reason to stay away from investment opportunities factors that enhance the process, which will continue to help us
at the right price. Prime Minister Modi remains in power after 10 years uncover the best equity opportunities in developed, emerging and
and while his coalition looks different, it appears that progress on frontier markets.
THEMES
economic reforms remain high on the agenda. Our growth factors
Electrification not only measure momentum but also earnings, revenue revisions Saving the best for last, we are most bullish on our process. Over 30
and long-term growth and innovation. Simultaneously, our quality and years as a quant investor leaves its battle scars as the markets keep
Resources
value factors are also identifying opportunities that would be more you humble. But those battle scars represent learning opportunities.
Quantitative investing difficult for a fundamental investor to uncover. In the 1990s, I wasn’t long Amazon and in the 2000s I was not long
Private Markets Starbucks. I learned the quantitative models at the time were not
Conversely, some market watchers have described the Korean market picking up on “category killers” and adjusted accordingly. I believe
as cheap, but we would argue it’s felt perennially cheap for some we’ll be successful in the future because we are always looking at the
ASSET MIX time. Again, as stock pickers, we are not making decisions based on a markets. We don’t change our philosophy, which is always the core,
RECOMMENDATIONS high-level market call. Instead, we are using technology to identify the but are always working to become better at how we pick and value
Equities best ideas when a lack of information flow would make it very difficult companies. We beefed up our growth stock picking model and that’s
for a fundamental investor to do so. As mentioned, we analyze 10,000 why we have been long NVIDIA, Eli Lily and Novo Nordisk. Right now,
Fixed income emerging and frontier market stocks, twice daily. The universe of we don’t know what stocks will work tomorrow. But we are confident
stocks is so large and varied that the efficacy of our models alongside our model will know.
the rise in computing power provide us with an edge we will continue

Allocating to Mackenzie Global Quant funds provides:

• Access to an expanded • An alpha driven approach powered • Diversification of idiosyncratic manager
investable universe by cutting edge technology and gains risk due to investment process.
(20,000 stocks analyzed 2x/day). in computing power.
2025 MARKET OUTLOOK

24
 THEME 4 P R I VATE MAR KETS
GLOBAL MACRO
OVERVIEW

ASSET CLASS VIEWS –

Private markets have become more accessible
AROUND THE WORLD
Over the past decade, demand for private equity, private credit and private infrastructure has surged.
Since 2013, private equity assets have jumped by more than 500% to over $10 trillion (USD) globally,4
THEMES
while private credit has swelled nearly 300% over the same period to over $1.7 trillion (USD).5
Electrification
Resources Investors have been drawn to the private markets for their enhanced alpha potential,
uncorrelated returns and diversification. With new fund structures coming to market,
Quantitative investing
this space has become more accessible to investors than ever.

“
Private Markets
At the same time, numerous tailwinds will continue to accelerate interest in
this space.
ASSET MIX As private markets
RECOMMENDATIONS
Equities
Private equity
Private equity offers significant opportunities, as more than 90% of companies in the
become more
Fixed income US are privately owned.6 Businesses that would have once gone public are staying accessible, we
private, partly a result of increased regulation, but also to allow the company to
focus on its business, rather than dealing with short-term-focused shareholders or believe they can be
having its growth plans scrutinized by analysts on a quarterly basis. Companies also
see staying private as a more attractive way to access capital while tapping into the powerful portfolio
expertise of private investors to support their growth. Since 2006, there has been
a 180% jump in private equity-backed companies, while the number of US publicly
construction tools.
traded companies has been cut in half (Figure 6).

2025 MARKET OUTLOOK 4 Source: Preqin, as of December 31, 2023

5 Source: https://www.preqin.com/insights/research/reports/future-of-alternatives-2028
6 Source: Capital IQ/NAICS association data as of March 2024. Sample size of 185,000 largest US companies.

25
 THEME 4 P R I VATE MAR KETS
GLOBAL MACRO
OVERVIEW
Figure 6: Staying private for longer
ASSET CLASS VIEWS – Number of US private and public companies 2006-2023
AROUND THE WORLD
11,200
THEMES -27%
Electrification +138%
Resources 4,000
5,100

Quantitative investing 2,500

2006 2023 2006 2023
Private Markets
US PE-backed companies US publicly traded companies

ASSET MIX Source: Pitchbook/LCD; Capital IQ/NAICS association

RECOMMENDATIONS
Equities
This decade-long expansion is only expected to increase as the Within private equity, interest in the secondary markets has been
Fixed income
benefits of staying private — plus the increase in attention from strong. The slowdown of M&A activity in 2023 resulted in reduced
investors — become more widely known. Several macroeconomic private company exit opportunities, which has led private equity
factors are driving demand as well. As interest rates and inflation managers to look to the secondary market to free up cash flows, help
ease, we expect deals will further increase, spurring renewed activity investors rebalance exposures and manage risk.
in this space — something we’ve already seen in the first three
quarters of 2024. We expect all these larger trends to continue driving secondary
activity and for investor interest to grow, causing the private equity
space to expand substantially from here.

2025 MARKET OUTLOOK

26
 THEME 4 P R I VATE MAR KETS
GLOBAL MACRO
OVERVIEW
Private credit

ASSET CLASS VIEWS – The private credit market has grown significantly, partly because many with relatively strong downside protection due to substantial equity
banks reduced lending to private borrowers in the years after the cushions and strong lender protections.
AROUND THE WORLD
global financial crisis to comply with stricter regulations. The 2023 US
regional banking crisis made financial institutions once again review Despite a higher cost of debt, there have been far fewer defaults than
THEMES their practices, which caused lending to retrench further. The growth many had expected. As of Q2 2024, the trailing 12-month default rate
in private equity-backed companies has also helped this part of the by issuer count in the Morningstar LSTA US Leveraged Loan Index
Electrification was 1.6%, which remains in line with the 10-year average despite a
market expand.
Resources higher cost of borrowing.
Private credit assets under management are on pace to rise by nearly
Quantitative investing Although most borrowers are performing well, those who are highly
two-thirds to $2.8 trillion (USD) by 2028.7 As large a jump as that may
Private Markets be, there is ample room for growth considering the $16 trillion (USD) leveraged or within cyclical industries are facing challenges, making
private market sector (a figure that comprises equity and debt) only it important to understand the underlying loan portfolio construction.
accounts for 5% of total capital globally.8 We believe there is a significant opportunity within private credit for
ASSET MIX individual investors, particularly in the current economic environment,
RECOMMENDATIONS As investors are finding out, private credit comes with many where we expect to see long-term interest rates remain at higher
Equities advantages. It’s predominantly a floating-rate asset class, meaning levels than we’ve seen over the past decade. Because these are
borrowers pay a variable amount above a fixed base rate. With base longer-term investments with less liquidity, the asset class has offered
Fixed income
rates in the US around 5%, senior secured loans to high-quality investors a return premium to public fixed-income investments, along
mid-market companies are generating low double-digit returns with strong rates of capital preservation and lower volatility.

2025 MARKET OUTLOOK

7 Source: https://www.preqin.com/insights/research/reports/future-of-alternatives-2028
8 Source: Preqin, December 2023; Reuters, 2023; World Federation of Exchanges (WFE) and the Securities Industry and Financial Markets Association (SIFMA) 2023.

27
 THEME 4 P R I VATE MAR KETS
GLOBAL MACRO
OVERVIEW
Private infrastructure

ASSET CLASS VIEWS – Several tailwinds are propelling the private infrastructure space private-public partnerships of critical assets. Investors can share in
forward. First, many of the critical assets that economies run on — the economic and societal returns these investments will generate
AROUND THE WORLD
bridges, roads, ports and more — have fallen into disrepair, and over the coming decades. We’re already seeing a significant number
governments, struggling with increasing debt loads, are turning to of transactions in the mid-market, which typically focuses on projects
THEMES private markets for the trillions in necessary capital investments. with an enterprise value below $1 billion (USD).
Electrification Secondly, countries are facing pressure to create new infrastructure to As private markets become more accessible, we believe they can be
Resources meet the increased need for powerful data centres and to modernize powerful portfolio construction tools. At a time when public markets
the energy grid as more electric vehicles and renewable power come seem driven as much by emotion as fundamentals, investing in assets
Quantitative investing
to market. It’s estimated that between now and 2030, $3.3 trillion that come with long-term commitments can help reduce panic selling
Private Markets (USD)9 in average annual capital will be required to meet demand. while rewarding patient investors with the potential for lower risk,
reduced drawdowns, potentially higher returns and enhanced yields
Large capital requirements such as these represent an opportunity relative to public market asset classes.
ASSET MIX for investors to provide funding, either through private ownership or
RECOMMENDATIONS
Equities
Fixed income
A Mackenzie Northleaf private markets allocation can provide:
• The potential for higher • The potential for lower portfolio risk, reduced • Access to Northleaf, a global private
returns with low correlation drawdowns, and potentially enhanced yields markets specialist firm with a successful
to public markets. relative to public market asset classes. long-term record.

2025 MARKET OUTLOOK

9 Source: McKinsey analysis; McKinsey Global Institute analysis

28
GLOBAL MACRO
OVERVIEW

ASSET CLASS VIEWS –

AROUND THE WORLD

THEMES

Asset mix
Electrification
Resources
Quantitative investing

recommendations
Private Markets

ASSET MIX
RECOMMENDATIONS
Equities
Fixed income

Mackenzie Investments Global Investment Committee

2025 MARKET OUTLOOK

29
 ASSET MI X R EC OMMENDATI ONS
GLOBAL MACRO
OVERVIEW UNDERWEIGHT NEUTRAL OVERWEIGHT

ASSET CLASS VIEWS –

Equities
AROUND THE WORLD We expect equities will continue to rise in 2025. This outlook is driven by the expectation of solid corporate earnings growth across
developed markets in the coming year. Additionally, central banks are likely to lower policy rates towards their neutral levels, easing
financial conditions and supporting higher equity valuations.
THEMES
Electrification Canada
Canadian equities are positioned to perform well, benefitting from the ongoing widening market breadth that began in the latter half of
Resources 2024. While domestic economic growth prospects remain modest, Canada should benefit from a boost in US growth. A deteriorating
Quantitative investing domestic economy should also accelerate the Bank of Canada’s path toward a neutral policy stance, supporting domestic demand and
improving corporate earnings prospects. This should allow room for modest valuation expansion.
Private Markets
US
ASSET MIX US equities are expected to outperform global stocks. A Republican congressional sweep is viewed as business-friendly due to the
RECOMMENDATIONS expectation for tax cuts, deregulation and a more favourable banking environment. These policies should provide a fertile growth
backdrop, allowing corporate America to maintain its momentum heading into 2025. While some concern is warranted due to trade and
Equities tariff policy uncertainty, fiscal policy and inflationary risks, on balance there remains attractive value available in many of the overlooked
stocks in the US market that did not participate in the mega-cap rally.
Fixed income
International
The European economy stands to gain from lower interest rates. In addition, conservative corporate earnings expectations could yield
positive surprises if global growth remains resilient. We maintain a constructive view on Japanese equities, where ongoing regulatory
reforms and shifts in corporate behaviour are driving efficiencies and profitability. Although inflationary pressures have forced a more
hawkish stance from the Bank of Japan, the recent financial instability caused by a stronger yen will likely result in a more patient approach
from the Bank of Japan. Overall, the outlook for international stocks remains uncertain in the short term due to President Trump’s stated
trade policies. Nevertheless, modest valuations and diversification benefits may present an attractive entry point for longer-term investors.

Emerging markets
Despite the recent surge in Chinese equities, more forceful follow-through on fiscal measures is needed to tackle the structural challenges
in the economy, particularly the slumping property sector, depressed domestic consumption, and weak consumer sentiment. While
policymakers appear committed to meeting growth targets, ambiguity around potential measures has raised concerns, erasing some of the
2025 MARKET OUTLOOK recent gains. With a stronger dollar and heightened geopolitical tensions anticipated under a second Trump Administration, a challenging
environment for the Chinese economy is expected, underpinning our tactical underweight stance in emerging market equities.

30
 ASSET MI X R EC OMMENDATI ONS
GLOBAL MACRO
OVERVIEW UNDERWEIGHT NEUTRAL OVERWEIGHT

ASSET CLASS VIEWS –

Fixed income
AROUND THE WORLD The outlook for fixed income has become more mixed heading into 2025. While global central banks are anticipated to continue rate
cuts, the pace of cuts will likely vary among them. Persistent US economic strength could set a floor for US interest rates, with possible
upward pressure on the long end of the yield curve if policy changes push up US inflation expectations. Overall, bond markets have
THEMES priced-in reasonable expectations of interest rate reductions to come in 2025.

Electrification
Sovereign bonds
Resources Anticipated policy changes under the incoming US administration could renew inflationary pressures amid a surge in domestic-led
Quantitative investing economic growth. This may limit the Federal Reserve’s need to reduce interest rates as much as previously anticipated. US protectionist
policies may hinder growth in other global economies that are major exporters. This dynamic is likely to widen the gap in economic
Private Markets growth forecasts between the US and other nations, driving a divergence in monetary policy. As a result, we anticipate global central
banks to reduce interest rates by more than the US Federal Reserve.

ASSET MIX
IG corporate bonds
RECOMMENDATIONS The additional yield pickup, lower central bank policy rates and stable spreads backed by resilient corporate fundamentals present
Equities a favourable outlook for investment-grade corporate bonds. An overweight exposure to investment-grade credit remains a relatively
attractive position for additional yield and solid risk-adjusted returns within a fixed income portfolio.
Fixed income
HY corporate bonds
Within the high-yield bond market, lower quality issuers may face deteriorating fundamentals as their coupons reset higher in 2025.
We expect this to gradually increase default rates and widen credit spreads in the lowest-quality segments of the high-yield bond
market. By focusing on higher-quality bonds within this space, portfolios can still benefit from additional yield.

2025 MARKET OUTLOOK

31
The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to
buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. This commentary is general in nature
and cannot take into account the financial circumstances or objectives of any investor. As such, investors should consider their financial circumstances and objectives before making any financial decisions. Commissions, trailing commissions,
management fees, and expenses all may be associated with mutual fund or ETF investments. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not
be repeated. Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in the investment products that seek to track an index. This document includes forward-looking information
that is based on forecasts of future events as of November 25, 2024. Mackenzie Financial Corporation will not necessarily update the information to reflect changes after that date. Forward-looking statements are not guarantees of future
performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Some of these risks are changes to or volatility in the economy, politics, securities markets, interest
rates, currency exchange rates, business competition, capital markets, technology, laws, or when catastrophic events occur. Do not place undue reliance on forward-looking information. In addition, any statement about companies is not an
endorsement or recommendation to buy or sell any security.

2025 MARKET OUTLOOK