There still remains key GDP growth figures and employment data before the next rate decision on December 11th
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, November 19th, 2024
North Vancouver single family activity is continuing the strength it showed in October as listings begin to seasonally contract and buyers use their newfound purchasing power to strike deals. Townhouses and duplexes are the strongest segment, possibly a sign of things to come with new mortgage rules affecting this price cohort the most. Inventory is very low, setting up for the possibility of price appreciation into the spring next year. It is this feedback of increasing borrowing power into higher prices, that spurred Bank of Canada Deputy Carolyn Rogers from warning about the dangers of ‘tinkering with the mortgage market’.
Today’s Canadian inflation reading may serve to give the central bank pause in acting too aggressively in rate cuts. There are early signs that the weakening Canadian Dollar (which we’ve been warning about) are already feeding into price increases at grocery stores and elsewhere. There still remains key GDP growth figures and employment data before the next rate decision on December 11th. Extreme weakness in either could, of course, change their thought process. For now, 25 basis point reductions are the consensus expectation for the next two meetings. In the US, however, a pause in rate cuts sometime in December-January is the baseline expectation as the US digests the policy implications of a Donald Trump presidency. A slower than expected pace of rate cuts was one of the risk factors to the housing market identified in my annual report in the early summer.
With control of all branches of government, Trump now has far more latitude to pursue his agenda unimpeded. As we expected, markets cheered the definitive outcome by sending equities higher (initially, at least). Bond yields also rose with the expectation of increased government deficits. This increased yield is resulting in US dollar strength across the board as money flows to higher performing assets in a “risk on” atmosphere.
Stocks have pulled back from their pre-election all-time highs, but modestly so. There still remains volatility to be bled out of the market and the path of least resistance appears to be upward. Consider also, year-to-date returns of: S&P 500 – 24%, Nasdaq – 26%, TSX – 19%. Money managers will tend to chase performance into year end in an exercise known as “window dressing”. A strong US consumer performance will often result in a “Santa Claus Rally” and constant policy announcements ahead of the inauguration will keep investors chasing risk. As we always like to show both sides of the equation, this would be happening from already high valuation levels. Policy can cut both ways as well. Some recent announcements indicate the administration may “go after” large corporations with intimate government ties, disrupt lucrative government contracts and cut spending on climate-related investments. How this affects corporate bottom lines is a wildcard worth watching.
Bitcoin also reacted favourably to the Trump election and the legions of pro-crypto lawmakers that won election and are advocating for deeper integrations in the financial system. With a price now in the mid $90,000 range, talk is shifting toward strategic bitcoin allocations of corporate and national treasuries. For an asset with a limited supply, implications should be obvious if those announcements were to materialize. Gold, on the other hand, sold off on the news of a definitive election result, staying true to its role as a hedge against uncertainty. Oil also behaved as expected, with the price dropping on expectations of increased US production. It now sits below $70 and will begin to detract from inflation readings on any further weakness.
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.