Well, the holiday season is certainly upon us and I’m confident you’ve all got a busy few weeks ahead of you.  Here’s hoping you do have an opportunity to find time for you when you’re not off finding that right gift, or attending a work or family holiday event, Personally, I’ve always loved the holiday season as it does give you the opportunity to reconnect with family and friends that you may not have had the opportunity to during the year!

 

Speaking of busy, when it comes to the global economy and markets over the last two weeks it has been anything but slow.  Here at home, unemployment continues to rise – hitting 6.8% in November after holding steady in September and October at 6.5%.  The main driver for the increase in the unemployment rate has been in the longer than usual job searches most new entrants to the labour force are having, however permanent layoffs still accounted for nearly 40% of the rise in the unemployment rate since late 2022.  Wage growth has also slowed, from 4.9% down to 4.1% and this downward pressure on wages will continue as the supply of labour continues to outstrip demand.  Though this does not bode well from an economic activity perspective, it does provide support for the Bank of Canada to cut rates another 0.50% when they meet next week.  For more on where we see the markets going next week click here: Forward Guidance: Our Weekly Preview

 

Down in the U.S., the economy continues to show signs of resilience despite the impending headwind of potential tariffs on foreign goods.  Demand for employment remains high, though it has begun to be outstripped by the supply of labour available, resulting in the unemployment rate rising slightly in November to 4.1% (0.1% increase from October).  Unlike here in Canada, layoffs have been low though they have started to edge higher will wage growth has remained relatively stable at 4.0%.  Barring any surprises in the October CPI print, we expected that the U.S. Fed will move to cut another 0.25% when they wrap up their December meeting on the 18^th.   Finally, the Michigan Consumer Sentiment Index came in at 74.0 points on a preliminary read for December, up 2.9 points from November and the highest print we’ve seen since April of this year.  Overall, the U.S. economy appears to be on solid footing and though there may be a gradual slow down in growth in 2025 due to policy changes, such as the implementation of tariffs, for now our outlook remains overly positive for U.S. investments.  RBC GAM’s Chief Economist Eric Lascelles joined the RBC The Download podcast last week and his commentary on the potential impact of tariffs is certainly worth the listen: Talking about tariffs: what’s next for the Canadian economy?

 

The headlines that I am confident grabbed your attention this week was the fall of the French government after a non-confidence vote on Tuesday resulted in the ouster of Prime Minister Michael Barnier.  In sum, his ouster was the result of the actions he took to bypass parliament and push through a budget that was most certainly not going to survive a vote in the legislature.  Without a Prime Minister, constitutionally the French government cannot operate in line with it’s constitution.  This spiked volatility in French markets, however by the end of the week there had been assurance from both the right and centre coalitions that the government would continue to move forward, with Marie Le Pen promising to ensure a budget was delivered in the next few weeks and Emmanuel Macron committing to stay on until the end of his term.  As of market close on Friday bond yields had fallen, and the spread between French and Germany bonds had narrowed.  Unfortunately, political turmoil is the last thing Europe needs given both the French and German economies continue to show signs of stagnant growth, while the region is also faced with the prospect of tariffs from the U.S. administration in 2025.   European stocks continue to trade at a relative discount, however it would be wise to keep your European exposure underweight for the time being and into early 2025.