In our featured economic commentary this week, we discuss the market jitters that continued despite the U.S. Federal Reserve delivering a message that would normally have calmed investor nerves. In addition to our commentary, we’ve also included a link to an article that provides insight into how the recovery is taking shape.
We’ve also included a few articles, podcasts, and videos that are not related to the economy in our post this week:
- Four questions snowbirds are asking as Canada heads into spring
- Podcast: CHASING DREAMS MATTERS to Chris Hadfield
- Event replay: Mental health and resiliency in a time of change
- 2020 Tax season resources
As always, we end our weekly blog posts with a few good news stories from in and around our community
Your economic update
All eyes were on the U.S. central bank this past week, and investors got what they were hoping for as the Federal Reserve reassured them that they have no plans to change policy any time soon. Nevertheless, the sell-off continued in the bond markets, while parts of the equity markets saw renewed pressure. The Canadian dollar sold off too, although it remains close to a three-year high. We discuss this a bit more below and provide a brief update on the virus front.
The third wave of the global pandemic has continued its ascent over the past week in several countries. In Canada, the seven-day average rate of new daily infections stands at 3,300, versus the 3,000 from the same period a week ago. Ontario continues to drive nearly half of the country’s new infections, though Alberta and Manitoba saw the fastest rates of new infection growth over the past week.
There has been little change elsewhere, with parts of Europe imposing lockdowns once more as the rate of new infections has shown no sign of slowing. The trend is the same in Turkey and India. Brazil appears to be faring the worst of all, with its health care infrastructure under severe duress across the entire country.
The U.S. has yet to see any signs of a meaningful pickup in cases, though it is worth noting the number of new daily infections is higher than it was in the same period a week ago.
All eyes on the “Fed”
The U.S. Federal Reserve (Fed) meaningfully raised its economic growth projections for the year, lowered its unemployment forecasts, and modestly raised its expectations on inflation. With respect to the latter, the Fed reiterated its view that inflation will increase this year, likely above its target as the economy reopens, but then drift back down next year as things normalize.
The Fed’s commentary suggests that it currently has no changes planned to its approach to monetary policy, both with respect to asset purchases and interest rates. On the former, it indicated the rate of monthly bond purchases it has been making in an effort to increase the money supply and promote economic activity will remain in place until “substantial further progress” is made on its employment and inflation goals. The Fed indicated that it will try to communicate well in advance when it expects to achieve these levels. On the interest rate front, they indicated that there is little probability of a hike in rates until late 2023.
The announcement from the Fed was largely in-line with what most investors had anticipated, but it seems to have done little to alleviate the market’s concerns that monetary policy may have to tighten sooner than planned in order to limit sustained inflationary pressures.
The Canadian dollar
Most investors have understandably been preoccupied with the recent volatility in the bond markets, and the subsequent rotation witnessed across the equity markets. As a result, the Canadian dollar strength has largely flown under the radar, but it has quietly outperformed most other major currencies so far this year.
The rise in the Canadian dollar this year has been notable, as it has occurred in the midst of a relatively strong period for the U.S. dollar. This suggests that the Canadian dollar is being driven by domestic issues, as opposed to just broad U.S. currency weakness. These factors range from strengthening prices for commodities, such as oil and base metals, to increasing comfort that the elevated level of household debt won’t result in a major credit headwind in this country.
There is also growing anticipation that the Bank of Canada is more likely to slow its own pace of bond purchases, known as quantitative easing, before its U.S. counterpart. That may add further strength to Canadian bond yields, which in some cases (2-year and 5-year maturities for example) are already higher than in the U.S. In turn, these higher yields could make Canadian government bonds a more compelling alternative to U.S. government bonds for global investors, thereby providing some support to the Canadian dollar.
There is also the possibility that some of the competitive advantages that the U.S. has enjoyed over Canada could fade in the coming years. This may be particularly true with respect to taxes, as the U.S. is considering its first major tax hike in nearly thirty years to partially fund some of the massive stimulus already undertaken and yet to be announced. It remains premature to assess the probabilities of this occurring, but it could further support the Canadian dollar in coming years were it to materialize.
We expect some of the aforementioned tailwinds for the Canadian dollar to remain in place this year. While it presents a modest headwind to the performance of the U.S. and foreign investments we make in our portfolios when viewed in Canadian dollars, we believe it is a cost worth paying to ensure a well-diversified portfolio.
One year later: How the economic recovery is taking shape
Even though some sectors continue to suffer from the scarring effects of the pandemic, the global economy is faring better than many had feared. Not only has economic activity rebounded enthusiastically on partial reopenings last autumn, but the second wave of the virus has taken less of a toll on activity than the first as people and businesses have adapted to life in a COVID-19 world.
Read the full article online: One year later: How the economic recovery is taking shape
Four questions snowbirds are asking as Canada heads into spring
With the arrival of warmer spring weather and more hours of sunshine, there is a change in the air. Vaccines are rolling out, there are more opportunities to get outside, and more parts of life in Canada and the U.S. are planning to reopen.
But with governments on both sides of the border still discouraging non-essential cross-border travel, many snowbirds are wondering what to do about their U.S. property now and how to make the most of the Canadian spring.
Find out more online: Four questions snowbirds are asking as Canada heads into spring
Chris is a renaissance man who effortlessly floats between science, music, space, humanity and being a best-selling author who is also releasing his first non-fiction book - The Apollo Murders. Most of us dream, but what separates Chris from most is how he chases his dreams with curiosity, conviction and care for Planet Earth, and all living creatures.
If you want to chase your dreams, then listen to the life lessons that Chris Hadfield offers: CHASING DREAMS MATTERS to Chris Hadfield
Mental health and resiliency in a time of change
On Wednesday, February 17, we hosted an online event focusing on mental health and resiliency. We were joined by three dynamic guests who shared their personal journeys with us, including their struggles, realisations, and triumphs.
We would like to express our gratitude to Charmaine Collins, Cyndy Moffat-Forsyth, and Tyler McGregor for sharing their stories with all of us.
If you were not able to attend, we have posted the event replay on our website: Mental health and resiliency in a time of change
We look forward to sharing the video from our recent International Women’s Day event with you soon!
2020 Tax Season
It’s tax time! The 2020 tax season is underway, and we thought you might be interested in a few of these tax resources.
Deducting home office expense for 2020
Client Guide to 2020 Tax Reporting
2020 Tax preparation reminders
With the 2020 personal income tax return filing deadline fast approaching, this is a great time to see if you’re taking advantage of all of the tax benefits you may be entitled to. The following information outlines items you may want to consider when preparing your 2020 personal income tax return.
2020 Tax preparation reminders
Have questions? Please contact us if you would like us to put you in touch with a tax professional.
Each week, we like to end our blog posts with a few good news stories from in and around the community. We hope that they brighten your day!
- Downtown restaurant hopes to alleviate a little stress by offering a weekly free meal
- U of G's College Royal event goes virtual this weekend
- BBBSCW raises $50,000 at ‘Big Night In’ virtual gala
- #LoveLocal: Halton businesses support charities to end child hunger
- Georgetown Choral Society says thank you to front-line workers
- ‘Greatly missed’ Milton event making a return
As always, we are available to connect with you personally. Please don’t hesitate to contact us at 519-822-2024 or firstname.lastname@example.org.