Let’s remember that liquidity may chase all kinds of assets in search for fast returns, but it tends to end up in safer assets (like real estate) when the music stops.
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, January 29th, 2025
The North Shore market is still trending toward higher inventory levels, which is a good sign for buyers as they have been starved of options to choose from apart from a few months last summer. It’s still early, but transaction numbers haven’t yet perked up, implying that there’s something keeping marginal buyers on the sideline. You don’t need to look far for potential sources of that hesitation, as the news headlines provide plenty of reasons to give one pause – and on a daily (or hourly) basis. Whether it’s tariff threats (now increasingly looking likely to be implemented very soon) or an impending federal election, or interest rate movements, the landscape could look very different in just a short time. Very skilled and experienced geopolitics and financial market observers are admittedly unable to keep up with the pace of announcements and proclamations.
On the interest rate front, the Bank of Canada and the Federal Reserve will both announce rate decisions on Wednesday. The BoC is now expected to make a .25 bps cut and the Fed is expected to stand pat. Variable rate mortgages are going to become increasingly attractive and competitive. What this means for borrowers is that it will be even more important to consult with mortgage professionals to get advice on what makes the most sense for their situation and risk tolerance.
In just a few weeks the bond market has oscillated between inflation being a real concern to reappear with a vengeance, to being a secondary concern. Tariffs will have some affect, but there are also deflationary components to the inflation basket such as housing rents that will continue pulling headline numbers downward. Soon, there will be debt ceiling discussions in the US that may have significant impacts on US bond rates, which will of course filter across the border to our rates. President Trump has shown a willingness to dispose of operating norms if they conflict with his agenda. The bond market is a good place to watch for extreme reactions to such moves.
Stock markets have so far reacted favourably to recent changes. Monday’s market was an exception to this, as everyone learned what Deepseek was and Nvidia lost over half a trillion in market cap. If anything, the mini panic highlighted how quickly AI technology is accelerating. With the “compute barrier” and cost of running these enormous AI models plummeting, tech observers are now pointing to the fact that it will only allow for more and faster development. Nvidia proceeded to gain back on Tuesday much of what it lost previously as traders digested that. At the end of the day, it was a good experience for index investors to learn about weightings of these gigantic tech corporations in their portfolios.
Bitcoin continues to swing in a 10% range above the $100,000 mark. Some of the super optimistic predictions have not immediately panned out, but price has held up quite well despite that. The same can’t be said for some of the craziness in meme coins as billions are made and lost on things like TRUMP Coin, fartcoin, and other silliness. Liquidity is evidently not a problem these days. Let’s remember that liquidity may chase all kinds of assets in search for fast returns, but it tends to end up in safer assets (like real estate) when the music stops. Commodities are continuing to lag other investments with the exception of tariff-sensitive coffee and cocoa. Expect to be paying more for those on your next trip to Costco.
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.