Around the world in 80 seconds

October 30, 2023 | Portfolio Advisor – Fall 2023


Around the world in 80 seconds


Led by a surprising 0.2% contraction in second-quarter GDP, the Canadian economy is showing signs of mounting weakness. Once-resilient Canadian consumers have at long last run down their extraordinary savings amassed during the pandemic – one of the primary sources of the outsized purchases of goods and services that fueled the highest inflation in decades – while the labour market has begun to strain under the weight of rapidly slowing demand. Interest rate increases by the Bank of Canada are weighing heavily on consumers and businesses, reducing spending and investment further. With the global economy also showing signs of weakness, the probability that the country has entered into a sharply lower economic growth phase or even an outright recession (or will in the coming months) has risen significantly, and equity markets have pulled back over the late summer and early fall in response.


United States

The U.S. Federal Reserve’s (the Fed’s) aggressive interest rate increases since the spring of 2022 have begun to create cracks in what has been an otherwise remarkably resilient U.S. economy over 2023. While the labour market remains solid, job openings have begun to fall sharply while jobless claims have begun to rise. With housing also taking a negative turn, the country appears poised to begin its march towards an economic slowdown or outright recession in early to mid-2024. Markets have turned downwards and volatile in the face of uncertainty over the Fed’s intentions to further increase rates, with bond yields soaring to levels not seen since 2007, and even the much-vaunted Technology sector is beginning to show signs of weakness.



The region continues to strain under the combined impact of high inflation, which has substantially exceeded that of North America, and the sharply higher interest rates delivered by central banks designed to combat that inflation. The area’s economic behemoth, Germany, has already slipped into recessionary territory, making it highly likely that the rest of the continent will soon do the same. Soaring heat this summer scorched much of Europe, killing over 70,000 people and hurting spending and economic activity. While the region’s bourses have performed well over the summer, concerns that central bankers will be forced to extend interest-rate hikes to combat slowing, but still-troublesome inflation has pushed prices down more recently, and leading indicators are painting a bleak picture for the months ahead.


Emerging Markets

A surging U.S. dollar and rising interest rates are taking a toll on Emerging Market nations, driving up borrowing costs while stifling growth. China’s troubled real estate sector and limp economic growth has hit equity values, while sending a chill through developed markets as well. While we expect earnings growth in Emerging Markets to rise faster than in developed markets over the next two years, patience over the coming months will be required as capital flows adjust to the changing monetary regimes across the world, and a more stable market is reestablished following China’s sharp equity market downturn.

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