This Year in Review

My thoughts on Canadian economic performance in 2017 and what lies ahead

January 18, 2018

Michael Fahy, First Vice President, Portfolio Manager

Let’s take a brief year-end look at the economic, business and financial landscape in which we live and work in 2017. Generally, we’re concluding the year on favourable terms, though the consensus of opinion among many seasoned investment advisors – including myself – is that 2018 is unlikely to be quite so productive.

S&P 500

The S&P 500 has had a stellar year – to take just one index – rising 14% to record highs. Investors piled into stocks on growing hopes of U.S. corporate tax reform, an improving economic landscape and strong earnings growth.

Global stock markets

Global stock markets also surged this year, in part on expectations of U.S. tax reforms, which is seen boosting corporate profits and higher dividend payouts.

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The Current Account Counts

The Week Ahead

January 15, 2018

The Canadian dollar lost a few fans this week when markets were shocked, shocked, by a news report that the US tipped Canada that it will put us on notice of its intent to withdraw from NAFTA. The White House followed up that report with a statement saying that the President’s view on NAFTA had not changed. Exactly. It’s the worst trade deal ever, remember?

Now the foreign exchange market’s attention will shift from trade matters back to capital flows, with the Bank of Canada still likely to raise interest rates a quarter-point next week. The Bank chose to put a very positive spin on its Business Outlook Survey, and give particular emphasis to results that showed the economy is running at full capacity. It’s not going to be scared off yet by some Donald Trump bluster.

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Hey Babe, Take a Walk on the Supply Side

The Week Ahead

January 9, 2018

When the facts change, so do we. Canada’s two-month jobs surge brought forward the likely timing of the first of two Bank of Canada rate hikes for 2018.

Stateside, in the final rush to pass tax reforms, relative to the initial Senate bill, a further $100 bn in fiscal stimulus was shifted into 2018, rather than being delayed until fiscal 2019, and more (if temporary) relief was provided to middle income earners. The result is that our forecasts for US growth in 2018 will be lifted by a few decimal places, with details forthcoming in our January issue of Forecast.

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