Inflation: Hope or Expectation?

The Week Ahead

September 25, 2017

Janet Yellen and her colleagues appear undeterred by low inflation and on course to hike rates again before the end of the year. Here in Canada, interest rates have risen twice despite a very benign inflation environment. The expectation is that, due to its lagged relationship with growth and the output gap, inflation will gradually rise back to respective targets.

However, that relies in part on the hope that factors weighing inflation down currently are, as Yellen says, “transitory”. While a one-time shift down in telecomm services has had an impact in the US, some other factors depressing inflation may take longer to dissipate.

Read More…

Longer Lives and Retirement Planning

The New Retirement Reality

September 21, 2017

Life expectancy on Canada is going through the roof. For upper-middle-class couples age 65 today, there’s a 43% chance that one or both will survive to at least age 95, according to the Society of Actuaries, which recently updated its mortality tables [Link:] By 2029, the odds of that 65-year-old reaching 95 climb to 50%. Meanwhile, Social Security data, which measures the overall U.S. population, puts the odds for that 65-year old couple reaching 95 at just 19%.

It wasn’t that long ago when financial planners based projections on the premise that a couple’s money had to be capable of supporting a 30-year retirement. That may have been true when people worked until 65 and very few lived past 95. That’s no longer the case.

Read More…

No, Hurricanes Aren’t Good for the Economy

The Week Ahead

September 18, 2017

Those with common sense and no economics training will be left scratching their heads by the title of this commentary. Who would even think that two massive storms, Harvey and Irma, will be an economic win? Some economic analysts, that’s who, and it’s because of the less than perfect way we measure economic well-being.

Real GDP growth, which captures all the headlines, measures changes in the after-in ation value of goods and services produced in a given period of time. US third- quarter results will take a major hit from all the lost hours of work and missing output in the affected states.

Read More…