With 2017 almost at the halfway point, economists at Desjardins Group are anticipating a pick up in Canadian stock returns, but a drop off for bond markets, in the second half of the year.

In a report published Wednesday, the firm notes that most major asset classes have recorded solid performances since the start of 2017.

“Foreign stock markets did particularly well, having benefited from a weaker greenback,” the report says, noting that the MSCI EAFE index has returned close to 15% since the start of the year, and the U.S. stock market has continued to defy expectations by delivering continued returns.

In general, these gains are being underpinned by strong growth in corporate profits, the report says. Although, looking ahead, it expects the gains to slow.

“After a remarkable first half of the year, smaller gains are expected of foreign stock markets between now and the end of 2017, as we expect a rebound of the U.S. dollar. However, there is little reason to anticipate a sustained slump for stock indexes in general until clear signs that the end of the expansion cycle become apparent,” the report says.

For the Canadian stock market, the first half has been tepid. Equities have gained just 0.4% since the start of the year, as weakness in the commodity and financial sectors have weighed on the overall index. However, looking ahead to the second half, the firm expects Canadian stocks to pick up, the report says.

“Since the problems facing Home Capital do not seem to be spreading and oil prices could rise to around US$55, we expect the Canadian stock market to compensate for some of its losses in the next few months and post a total return of approximately 6.5% for the year, as a whole,” the report says.

Conversely, bond markets could come under pressure in the second half, amid rising interest rates, the report suggests.

“If we are correct in our assumption that the Fed will continue to gradually raise its key rates in the next few quarters, bond yields should soon resume their upward trend, which would limit bond market returns,” the report says.

“As we are now forecasting that the Bank of Canada will begin monetary firming in October, the next few months could be particularly difficult for the Canadian bond market,” it adds.