The Bank of Canada has two more interest rate announcements this year.
One later this month and another in December. Although the U.S. economy has recently showed signs of strength, the BoC has said it is willing to diverge from the Federal Reserve on monetary policy when Canadian economic conditions warrant it.
We know that the Canadian unemployment rate is 6.6% in the most recent report. This is at a seven year peak. And I bet the upcoming data for September will show it climb to 6.7%. I wouldn’t be surprised if we see a 0.50% rate cut in the next BoC meeting.
While our unemployment rate has been rising, the U.S. rate has been falling. One reason for the divergence in the labour market is due to a much higher immigration target in Canada. This has primarily fuelled unemployment for immigrants and young workers. To help solve this problem, Prime Minister Justin Trudeau announced his government will reduce the amount of people Canada will take in going forward. But I think it’s already too little, too late.
Businesses are not hiring as much as before with job openings down (yellow line in graph below.) Meanwhile, the unemployment rate bottomed in 2022 (blue line) and has been steadily climbing since.
So even though our neighbour to the south is doing okay for now, I wouldn’t count on them to take us out of a recession. This is why I have added some bonds to my portfolio this year. If the economy does weaken, we will likely see more rate cuts. Even the anticipation of lower rates should boost the price of bond funds, as we’ve seen over the last 6 months or so. More recently bond yields have risen again, but I expect this to be a temporary trend before reversing again into next year.
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Random Useless Fact:
The world’s most expensive safe is Dottling’s Narcisuss. It weighs 800 kg, and costs $336,000 USD.
Firstly, good to have you back internet friend haha! I agree the bonds are slowly creeping in back in and the argument is that you can’t be buying bonds right in the gist of it, since bonds have durations (even if it’s a bond fund) so now it’s a good time to be on the lookout for it. I know we’re forever conjoint twins with our American buddy but I really think we ought to venture out and test the waters with others to trade, yes it’s not as easy as I say it is but we have to make an effort. For example, placing a 100% tariff on Chinese EVs is absolutely ridiculous… everything we have in Canada is monopolized an eventually will be bought up such as wireless telecoms airlines etc Sidenote, I was in talks years back regarding import/export canola oil to China and the local producer showed me a chart which was indicative that China can produce its own canola oil but will occasionally trade with Canada as a sign of international relations. What I’m trying to get at is that we can’t be dependent on the USA and need to venture out more to help… Read more »
Thanks for the comment, pal. 🙂 It’s good to be back.
I always thought the tariffs on Chinese goods were put in place due to political reasons and not for the benefit of Canadian citizens. And I agree. We can’t depend on one country, our neighbour, for most of our trade and business. Other countries like China are farther away. Maybe one way to get around the distance problem is through technology.
I used to work for a Vancouver company that outsourced some animation work to Shanghai. It would be nice to see more online business and collaboration between Canada and overseas countries. We can work on larger software projects together and distribute them worldwide.