(Montreal) At a time when the hope of a drop in interest rates next year is raising investors’ enthusiasm, strategists at National Bank and Desjardins are giving more space to bonds, which they see as a policy insurance against a stock market downturn.

“It’s been a long time since we were overweighted in bonds at the start of the year, but this is indeed the case,” responds strategist Jean-René Ouellet, of Desjardins Wealth Management, in an interview with the company of his colleague Michel Doucet, also a strategist.

Generally, bonds tend to serve as a counterweight to stocks in a balanced portfolio. When the economy is doing poorly and stocks are in retreat, interest rates tend to fall, which in turn increases the value of bonds already on the market.

With monetary tightening, bonds would now offer better protection than when interest rates were at a historic low at the height of the pandemic, believes Mr. Ouellet, who is starting the year “under the sign of serenity”.

On the economic front, his colleague Michel Doucet does not anticipate disaster, despite their cautious approach. “In 2024, what do we expect from Desjardins Group? A soft landing in the United States and a modest, short recession in Canada. »

The risk of a recession in the United States has not been fully ruled out, warns Mr. Ouellet. “Could we see a decrease in stock markets of 20% to 25% next year in an alternative scenario? The answer is yes. This is why, in the current context, we are adopting a relatively cautious positioning. »

For his part, the economist and chief strategist of the National Bank, Stéfane Marion, anticipates a more difficult year on the stock markets. He believes that investors are too optimistic about the profits that companies will manage to generate next year.

“In the current context where we are talking about a large-scale global monetary tightening, the worst for profits would have been stagnation,” he says in a tone marked by skepticism. From now on, [the forecasts suggest] that it will accelerate through an expansion of profit margins, on top of that, my sales would be fueled at twice inflation.

“You can’t exclude anything in life, of course, but that would be counter-intuitive,” he continues.

For the index S

The chief economist of the National Bank believes that the economic outlook is more favorable in the United States. At more than 19 times 2024 earnings forecasts, the S

On both sides of the border, consumer behavior will be decisive for the future, believes Michel Doucet. “What can go wrong next year? This would be a consumer who continues to spend and interest rates which are lower. What can go wrong? This would be a consumer who is entering a phase of deleveraging. »

So far, the Federal Reserve (Fed) in the United States appears to be more confident that it will reduce interest rates in 2024 than the Bank of Canada suggests.

Mr. Doucet considers that monetary easing is, however, inevitable in the country. “The situation in Canada will merit the Bank of Canada lowering its key rate in 2024 to give breathing space to Canadian consumers and businesses that must invest in machinery and equipment. »

Mr. Marion finds it curious that the Fed is in the lead in talking about monetary easing while the American economy shows greater resilience than other major world economies.

“What is surprising is that the central bank with the most resilient economy seems to be the first to open the door with rate cuts,” he points out. The United States has just come out of a quarter of 5% growth with an unemployment rate at 4% and inflation remaining above target. »

In their model portfolio, the strategists surveyed take a conservative approach by overweighting bonds, with a preference for longer maturities and government bonds. On the equity side, they give precedence to sectors deemed more defensive.

Mr. Marion favors dividend stocks, including utilities and telecommunications. “Anything that is discretionary would be best avoided. »

In the same state of mind, Mr. Ouellet believes that dividend stocks such as telecommunications, real estate funds or utilities are in a good position in the face of a possible drop in rates. “We still have to be careful in public services, because there are companies carrying a large debt burden,” he adds.

Even though the food sector generally corresponds to a more defensive profile, Mr. Ouellet is a little more cautious this time. “Comparables are very, very, very difficult. Everyone was confined, everyone stayed at home. Everyone ate at home. When we start to have very strong price moderation, even in food, that means that growth will be more difficult. »