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Short-term pain mitigated by long-term gain is on tap for 2024, according to CIBC World Markets Inc.’s economic outlook for the year ahead.

In a new report, the bank said that while 2024 is on track for a weak start — amid still-high inflation, slowing economic growth, and tightening financial conditions — it should finish strong, with inflation receding and interest rates coming down, laying the groundwork for a stronger 2025.

“As they say, all’s well that ends well, and we expect to close the final chapter on 2024 with the economy offering a much sunnier note for investors in both equities and fixed income assets,” the report said.

The baseline outlook calls for the Bank of Canada to start cutting rates before the U.S. Federal Reserve Board, beginning with its first move as early as next June — and for the BoC to cut rates by a total of 150 basis points by the end of the year.

“That should not only see growth improving towards year end, but could make winners out of both stocks and bonds, as markets look ahead to lower policy rates and better earnings prospects in 2025,” it said.

While there are risks to its outlook, CIBC said they are largely the sort that a diversified portfolio of both equities and bonds should be able to absorb.

For instance, while a “harder landing” for economic growth would hurt stocks, this would likely prompt more aggressive rate cuts, boosting returns on bonds.

Conversely, if rate cuts are slower or smaller than expected, bond returns may suffer. “But corporate earnings should give a lift to equities, and shorter dated bonds will provide a decent running yield,” it said.

“Barring much more troubling geopolitics, all’s well that ends well should apply to diversified portfolios, even if the start of 2024 remains challenging for investors,” it concluded.