The Two Minute Market Update is intended to keep readers apprised of what’s going on in local real estate markets and in the global financial markets that affect real estate via inflation, interest rates, capital flows and public policy. It is best suited for those not able to keep up with all the news every day, but still wanting to be informed.
Two Minute Market Update, July 16th, 2024
The so-called “summer doldrums” are definitely here this year, as the number of transactions has continued to track lower on the North Shore, throughout the GVA and beyond. The pace of new listings has moderated although inventory continues to build. The conditions are referred to as a “balanced market”, which has not existed for single family homes in North Vancouver for many years. Should the conditions persist further a “buyer’s market” may present opportunities in the fall for prospective purchasers. Ironically, both buyers and sellers seem to be waiting for lower interest rates before making major decisions, thinking it will be more advantageous to their bargaining positions. They can’t both be right.
Softening inflation readings from the US (last week) and Canada (today), combined with a number of economic indicators showing weakening fundamentals, leave the Bank of Canada with plenty of justification for another rate cut at next Wednesday’s (July 24th) meeting. Odds of a September cut are also growing, and unless the Canadian Dollar, inflation data or the housing market begin to react against their wishes, incremental cuts can be reasonably expected. The most aggressive cutting programme would see the policy rate at 3.75% by the end of the year. That would only materialize, however, if the BoC feels that they have gotten behind the curve.
After a recent bounce, both US and Canadian government bond yields have been falling again to multi-month lows anticipating future rate cuts. As yields fall and prices rise inversely, the incentive for foreign central banks to sell their US Treasury holdings increases. This needs to be met by US domestic purchases or rates will cease their decline, regardless of the economic data.
US stocks are continuing to make new all-time highs and are now dragging up smaller companies with the outperforming mega cap stocks. This “sector rotation” is constructive for further gains as concentration in just a few companies is a sign of an unstable market. The increasing likelihood of a Donald Trump presidency is also encouraging investors to be more aggressive as he is considered to be favourable to domestic companies with increased trade protectionism and reshoring of manufacturing industries.
Bitcoin is also rallying on similar news of a favourable US administration toward crypto, with both Trump and his VP pick Vance having spoken about the US being less hostile to the growth of burgeoning crypto and AI industries. Gold is making new all-time highs, as central banks, primarily BRICS countries, are increasing their holdings steadily. Oil is still in a tight range as geopolitical factors have not been enough to push prices higher.
Matthew Stiles
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Disclaimer: The information provided in this column is for general informational purposes only and does not constitute financial, investment, or other professional advice. While I strive to provide accurate and up-to-date information, I make no warranties or representations as to its accuracy, completeness, or reliability. Any actions taken based on this information are at your own risk. Always consult with a qualified financial advisor before making any investment decisions.