Forecasts
November 27, 2024
Questions? We've Got Answers: Addressing Issues Impacting the Economic and Financial Outlook
Investors must feel like 2024 has given them whiplash, as expectations for interest rates turn on a dime from one quarter to the next. The Trump trade is the latest catalyst, as the incoming administration's policies are perceived as inflationary, leading markets, and ourselves, to reduce the number of fed rate cuts expected.
November 01, 2024
Canada’s interest rate conundrum: Too much of a good thing
A call for a jumbo cut to head off mortgage reset rates must be assessed carefully. Surprisingly, roughly a quarter of mortgages will reset at a LOWER interest rate next year. For those renewing into higher rates, the shock might be milder than expected, given a 30% increase in home prices and wages. Years of debt repayments have also built equity room, which homeowners, including those with variable-rate-fixed-payments mortgages, can use to lower payments if needed.
October 25, 2024
Is 50 the New 25?
No, I’m not talking about age, although I’d greatly benefit from that view! I knew I would eat crow on Wednesday’s Bank of Canada (BoC) call with the high market pricing for a 50 basis point (bp) cut. There’s no regret in having conviction that risks need to be managed when the Bank delivers a rate cut that historically aligns to emergency periods. It could condition Canadians to expect data misses to be met with large monetary responses. I was hoping this would be clearly addressed in the press conference. Unfortunately, it was not, and there was little indication on where the bar is set for another 50 bps in December
September 26, 2024
Canadian Housing Outlook: When the Trickle Becomes a Flood
The Canadian 5-year bond yield has declined over 100 bps since early May, while the Bank of Canada has cut its policy rate 3 times (with two more likely on tap this year). In short, the interest rate environment has significantly improved. Housing market activity is stirring, yet Canadian sales gains have, thus far, trailed what could typically be expected given this rush of rate relief.
September 25, 2024
Long-Term Forecast
Following an economic slowdown in 2023 and 2024, Canadian output is expected to rebound in 2025 and 2026. Thereafter, real GDP growth is expected to decelerate to its long-run average of around 1.8% annually. Population growth is expected to decelerate in the coming years after its recent boom, boosting labour productivity growth.
September 19, 2024
Canadian Quarterly Economic Forecast
Although our global growth forecast has barely budged, it overlooks divergent paths between countries. The U.S. and Canada have benefited from upgrades, while previous growth stalwarts like China and Germany are getting the short end of the stick.
September 19, 2024
Provincial Economic Forecast
We’re most of the way through 2024, and the data seems to be adhering to our long-held view that the Atlantic Region and Prairies would outperform, in terms of GDP growth, this year. We continue to expect Ontario, Quebec, and B.C. to trail the pack. However, the former two provinces have benefitted from growth upgrades for 2024, leaving B.C. as the laggard.
August 26, 2024
Dollars and Sense: Ready… Set... Cut! Cut! Cut!
The Fed is finally ready to cut interest rates, but questions remain on the speed and magnitude. We penciled in 25 basis points per meeting, with over 250 bps in cuts over this year and next. However, now that the Fed is confident that inflation will return to target, it will prioritize a little more of the other side of its dual mandate – developments in the job market – to ultimately determine the speed and size of rate cuts.
August 22, 2024
The Only Constant Is Change
The 6th century Greek philosopher, Heraclitus, had it right with the idea that nothing is constant but change. He was referring to the universe and life, more generally, but it’s an apt depiction of the economy. After a long period of upside surprises to the economic data, markets are adjusting to a shift in paradigm. Fear moments will dot the landscape until confidence solidifies that the economic path remains a soft landing, and not a hard one.
