I was fortunate to be invited to an intimate gathering this morning to have breakfast with Dave McKay, CEO of Royal Bank. He went over the current economic environment and also discussed some key trends he sees in the world today:

• He suggested the economies in Canada and the US remain strong and continue to grow.
• We are likely in the late stages of this economic cycle, but could possibly see a few more years of growth before the next recession.
• The next economic downturn could last longer than prior downturns due to higher levels of debt.
• Bank profitability will be strong as short term interest rates continue to rise.
• Banking as we know it is changing radically as technology disrupts the historical model. RBC is investing heavily in AI (Artificial Intelligence) and new technologies in order to remain relevant to Canadians. It appears that not all banks will fair out as well in the next 10 years. Leadership will be crucial as the bank forges ahead.
• RBC continues to see big growth opportunities with their US franchise, City National Bank. 
• Interest rates look to be heading higher, trying to cool down a hot economy.
• Canada has its hands full negotiating NAFTA with the US. Dave gave several examples of Trump not being an easy man to negotiate with. Not making it easy on the Canadian side but hopeful a deal can get done in the coming weeks.
• Water in the US could be under threat and that middle Canada could be the bread basket of the world going forward. James Cameron (yes, the famous director of Titanic) is investing heavily in Saskatchewan farmland, suggesting this may be the start of a bigger trend. Read CBC article here: https://www.cbc.ca/news/canada/saskatchewan/james-cameron-vanscoy-pea-processing-plant-1.4295182
• Real estate prices in Canada not in danger of a significant drop. Demand in major markets like Vancouver, Toronto and Montreal still outstrips supply so prices should remain firm. Younger generations appear to be very comfortable living in smaller spaces downtown.

I will be keeping today’s discussion top of mind as I continue to shape our investment strategy going forward.

Try to stay cool.

Thanks for your continued business and trust.

Kind regards,

Allan