Markets Calling for More Rate Cuts from the Bank of Canada
Jul 19, 2024
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Markets are anticipating rate cuts from the Bank of Canada, with shelter inflation potentially dropping further. Real estate developers may face more challenges. The discussion also touches on political volatility, the state of ESG and DEI initiatives, and the appeal of ZSP ETF for S&P 500 exposure.
Markets anticipate rate cuts by Bank of Canada due to lagging shelter inflation.
Investors rely on ZSP ETF for simplified S&P 500 exposure amid global economic uncertainties.
Deep dives
Overview of ZSP ETF
Investors are using the ZSP ETF for S&P 500 exposure due to its simplicity and cost-efficiency since 2012. ZSP provides instant access to a diversified stock portfolio of 500 stocks in the index, a feat that would require significant expertise and frequent rebalancing with individual stocks. The ETF streamlines this process by offering a direct and low-cost way to access the index.
Potential Economic Impact of US Policy Shifts
Discussion around potential policy shifts in the US, particularly if Trump becomes president, could lead to accelerated economic growth through tax cuts and increased GDP. However, there are concerns about the debt-to-GDP ratio and the impact on global markets. This could result in increased inflation to manage debt levels, leading to implications for currency markets and trade dynamics.
Global Sovereign Debt Bubble Concerns
There is a collective agreement on the existence of a global sovereign debt bubble, with potential risks of a debt crisis. Central banks might resort to quantitative easing to address a potential crisis, which could impact bond markets and require significant policy responses. The scenario of a prolonged economic malaise or a sharp shock are considered alongside potential reactions from policymakers to mitigate risks.
Challenges in the Canadian Economy
The Canadian economy faces various challenges, including high household debt, weak wage growth, and declining business investment. Trade dynamics show a mix of positives and negatives, while manufacturing and labor market indicators highlight underlying weaknesses. Inflation remains a concern, and it is noted that a restrictive monetary policy may further strain the economy. Potential external factors, such as shifts in US policy, could influence Canada's economic outlook and capital flows.
Twinkie bets are live! Markets are calling for a rate cut next week and more to come. Lagging shelter inflation could bring CPI even lower. More pain to come for Real Estate developers. Political volatility is increasing. The death of ESG and DEI?
Check Out BMO's S&P 500 Index ZSP ETF Here: https://bit.ly/3xzrAO8 BMO Global Asset Mgmt, November 2023. Based on $11billion in AUM in ZSP and ZSP.U. BMO S&P 500 Index ETF ZSP | BMO Global Asset Management (bmogam.com)