Kingsmill's Investment Miscellanea - Friday April 19th, 2024

April 19, 2024 | Joshua Kingsmill


As we finish the tax season, many of our “snow-bird” clients are also heading home, or contemplating doing so soon. A discussion that has come up more than a few times, is “what's going to happen to the Canadian/US dollar rate?" As per the chart below, in the last 5 years, the Canadian dollar has had a peak of over $0.83 and a trough of just below $0.69. Both those extremes were short in duration:



With my usual caveat of not owning a crystal-ball, the Loonie is once again approaching the 72 cent level, the lower range of the bad in the last few years. The take-away for this is that it’s the expectations of rate cuts happening sooner in Canada than in the US, for a bunch of reasons. I tell my clients to anticipate that over the next 12 months, the Canadian dollar seems to be wanting to trend lower, and this is the consensus among experts (not to say they can’t be wrong!)


It now appears that Canada will lower rates sooner, while the US economy remains stronger, with inflation also higher than in Canada. Remember: the higher the inflation, the more likely rates stay the same or increase for any country. A key driver of this depreciation is the growing expectation for policy divergence between the Bank of Canada and Fed. At the start of the year, the market expected the US Fed would cut its policy rate by roughly 25 bps more than the BoC in 2024. At the time, US inflation trends were improving while Canadian CPI looked sticky, and the Fed was sounding relatively more dovish. Those trends have flipped year-to-date with Canadian core CPI measures slowing sharply on a 3-month annualized basis while US core inflation has accelerated.


I read a neat article, and it’s a great link to a few things we have been working on. Many of you know I’m running the stairs of the CN Tower this Sunday: 1,776 stairs - something I’ve always wanted to do. If anyone wants to sponsor (that I haven’t hit up already!), send me a separate email, and I will send you to our website.


The connection though, is that I hope that when I’m 99, I will do another run up the CN Tower. A fellow Hamiltonian, completed his 3rd CN Tower climb last year LINK. What an achievement! The tie-in to this of course, is that we are hosting a Longevity and Aging event on Monday, April 29th. We have reached out and invited a bunch of you that we thought would benefit from this seminar. If anyone else is interested, contact us and we can send details. Certainly, Mr. Walter Decker, climbing the CN Tower, would have a lot of wisdom to share.


Finally I predict that after having successfully completed the CN Tower Stair Run on Sunday, and raised considerable money for the WWF with my teammate, who is also originally from Hamilton: I will be walking very gingerly on Monday…


Have a great weekend!