Rates on the Rise?

Good morning,

The TSX reached another record high last week as the optimism since the U.S. election regained its torrid pace, after a slight one week slow down. Trump-mania continued as the materials and exporting industries continued to rise on the belief that a more robust U.S. economy will increase demand of Canadian raw materials, goods and services. I was in Grand Forks over the weekend with my son’s hockey team and I took the time chat with many American parents who were spectating. I often guided the conversation to politics and Trump to get some local insight. The vast majority of folks I spoke with (everyone for that matter) voted for Trump and to sum up their positions, it was a vote for change. Let’s see if their enthusiasm is warranted after Trump spends a couple of years in office.

Back home, Canadian banks announced strong quarterly earnings in line with expectations for the most part or slightly ahead of expectations. Canadian policy and regulation supports a healthy banking sector, and it continues to be effective in producing strong results. The Bank of Canada held its benchmark interest rate steady at 0.50% in advance of this week’s announcements on the same topic from the U.S. and a desire not to overreact to Canada’s strong third quarter. In the U.S. the major markets advanced strongly again, each gaining more than 3%. Financial firms, banks, and insurance companies have led the way for these gains and have posted double-digit percent increases since the election results.

The most anticipated news of the quarter, and perhaps 2016, will come today from Janet Yellen, Chairperson of the U.S. Federal Reserve. Interest rates have not increased since June 2006 and the indicators and “experts” are suggesting that an increase will be announced. At this point, a 0.25% increase in the interest rates has already been baked into the markets, but if the change is higher or lower the market could experience some volatility. In Canada, it will be a slower week for announcements as the manufacturing index and the Canadian Real Estate Association release data.

Stay bundled up this week.

Kevin

 

 

 

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