Dear valued client,
Canadians let out a sigh of relief this week when Tiff Macklem announced the Bank of Canada is holding its interest rate steady at 5%. The rationale behind the decision is that, by most metrics, the economy is showing signs of cooling. The move was expected and already priced into the market as the swift rate hike campaign which began in early 2022 has made major headway in bringing down inflation. As mentioned previously, the delicate balancing act central banks are attempting entails making debt expensive enough to slow price/wage growth, but not so slow it tips the economy into a recession. The BofC made it clear another rate hike before year’s end is still on the table in its statement following their decision, “We remain concerned about the persistence of underlying inflationary pressures, and are prepared to increase the policy interest rate further if needed.”
One factor that continues to play a main role in the “persistency of underlying inflationary pressures” is the price of energy. Oil shares rose to $90/barrel this week for the first time since November. You can thank Russia and Saudi Arabia for this as the two massive oil exporting countries decided to extend their colluded oil production cuts until December.
A report came out this week showing Canadian banks are putting more capital aside for possible loan (mortgage) defaults in the next 12-18 months. BMO, for instance, has set aside $492 M for this reason while the figure for CIBC is $736 M. This will likely impact market performance moving forward as more money banks allocate for this precautionary purpose means less will be paid out to investors in the form of dividends and higher returns.
I’d like to close with a quote from T. Harv Eker, author of Secrets of the Millionaire Mind. It reads,
“Your life is not just about you. It’s also about contributing to others. It’s about living true to your mission and reason for being here on this earth at this time. It’s about adding your piece of the puzzle to the world. Most people are so stuck in their egos that everything revolves around me, me, and more me. But if you want to be rich in the truest sense of the word, it can’t only be about you. It has to include adding value to other people’s lives.”
What is your mission and reason for being here?
Have a terrific weekend,
PW
