Hopes of Rate Cuts from the Bank of Canada are Starting to Fade
Jan 19, 2024
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Core inflation in Canada hotter than expected, immigration pressures shelter inflation, Feds contemplate limiting foreign students, bond yields push higher, nuclear energy coming to Alberta, World Economic Forum kicks off
Canada's core inflation surpasses expectations, posing challenges for the Bank of Canada.
The Feds consider imposing restrictions on foreign students in some provinces.
Canada's housing supply deficit worsens due to high immigration rates, impacting affordability and social cohesion.
Deep dives
Growing popularity of index investing
Passive investing or index investing, such as owning an entire index like the S&P 500, is becoming more popular among investors. Warren Buffett also acknowledges the benefits of index investing. For example, BMO's S&P 500 index ETF is the largest ETF in Canada and offers exposure to the returns of the market cap-weighted S&P 500 index at a low cost.
Benefits of BMO's S&P 500 index ETF
BMO's S&P 500 index ETF is a well-recognized and popular index-tracking ETF in Canada. This broad market ETF provides an efficient building block in a portfolio, saving time and effort while mitigating single stock risk. It offers exposure to the largest and most liquid public companies in the United States, delivering an easy-to-use solution and instant diversification.
Importance of considering management fees and expenses
Investments in exchange-traded funds (ETFs) may be associated with management fees, commissions, and other expenses. Therefore, it is crucial to carefully review the ETF facts or perspectives provided by BMO ETFs before making an investment. Investors should always consult a professional advisor before entering financial markets, as the information discussed in this episode is not intended as investment advice.
Resilient US Economy and Manufacturing Resurgence
Despite predictions of doom and gloom, the US economy has shown resiliency and positive growth. The manufacturing sector, in particular, has experienced a resurgence, with a significant increase in manufacturing capacity and output. This has been fueled by government initiatives aimed at promoting domestic manufacturing and the repatriation of jobs. The manufacturing boom has been especially evident in Mexico, a major recipient of reshored manufacturing. These trends reflect the success of economic strategies focusing on supporting infrastructure and manufacturing, which have contributed to the overall growth and stability of the US economy.
Housing Supply Deficit and Immigration Impact in Canada
Canada is facing a severe housing supply deficit, exacerbated by a surge in population due to high immigration rates. The demand for housing has outstripped the supply, leading to skyrocketing prices and an affordability crisis. The record-low housing start figures in relation to population growth highlight the challenge of meeting the housing needs of new arrivals. The supply shortage has triggered a cascade effect, driving up rents and contributing to multi-generational housing arrangements. The impact of this housing crisis extends beyond the economic realm, as it stokes anti-immigration sentiment and undermines social cohesion. Despite efforts to address the issue, the lack of decisive action and infrastructure investment continues to hinder Canada's ability to meet the growing demand for housing.
Core inflation in Canada came in hotter than expected. Immigration continues to pressure shelter inflation, creating further challenges for the Bank of Canada. The Feds contemplate limiting foreign students in several provinces. Bond yields push higher. Nuclear energy coming to Alberta. The World Economic Forum kicks off.
