Some banks are telling their clients to position themselves for the cutting cycle to be over already
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, June 18th, 2025
I discussed my thoughts on the North Shore housing market in more detail last week. I’ll continue to monitor sales and listings trends to decipher whether a turn in the market sentiment (and prices) could be at hand for the late summer/fall market. For now, sentiment is still at a very low level and is being compounded by news headlines commonly seen at market bottoms. Headlines like “Condo Market Collapse” evoke plenty of fear but also tend to get people off the sidelines looking for deals. Those “deals” thus far are less than what is hoped for.
Stepping back a bit, the local market is also impacted by macro and global factors beyond the control of buyers and sellers. These events and capital flows impact mortgage rates and banks’ willingness to lend. Markets are currently reacting to the breakout of a potential new war between Israel and Iran. While previous flare-ups between these two nations have sputtered, this has a more permanent feel with Iran’s regime at risk of annihilation. The price of oil has already jumped by 25% in three weeks, causing bond yields to return to the highest levels they’ve seen all year. Central banks, responding to the inflationary impact of rising energy prices, are now re-evaluating their rate cutting plans for the rest of the year. The Bank of Canada is only pricing in even odds for a cut at September’s meeting. Some banks are telling their clients to position themselves for the cutting cycle to be over already. Geopolitical conflicts that send financial asset prices one way or another have a tendency to reverse upon an unexpected resolution. Let’s hope that is the case and more chaos and bloodshed can be avoided.
The other major geopolitical factor to watch are the tariff discussions. Talks are underway at the G7 between the Trump team and other nations to resolve their disputes in a way that can be framed as a “win” for the US side. While results have not been substantial on many fronts yet, it does sound like negotiations are intense between many notable countries, including Canada. Major deals are expected – this is one of the drivers of the strength in the Canadian Dollar of late, moving it from $0.68 to nearly $0.74. For currency, that’s a large move and enough to impact the economy. I have my doubts about the ability of these deals to avoid the inflationary impact of what has already been done. Some of that might be seen in next week’s Canadian inflation data. Expect bond yields (and therefore fixed rate mortgages) to hinge on that report.
Stock markets recently came within a few percentage points of their all-time highs, which is remarkable given the sentiment in early April after the “Liberation Day” trade scare. The Canadian market, in fact, surpassed its previous level to set new records. Through all the chaos, a simple balanced portfolio of stocks and bonds is positive through the first half of the year. Investors that have for decades poured all their capital into real estate because of the ability profit from “leveraged gains” and taxed at a privileged rate must be watching the out-performance of more traditional assets with some envy. I expect the pain for real estate investors to continue, both through mediocre returns and policy adjustments meant to redistribute investor-owned properties to end users. Talk to me if you want to know more about how to rethink your investment mix.
Bitcoin has consolidated its gains after setting a new all-time high a month ago. Flows from institutional investors, corporate treasuries and other large buyers has been moderating volatility as the asset seeks a role as a “neutral reserve asset” for those needing to diversify. Gold made its own high two months ago and is similarly in a consolidation period. Gold mining stocks, particularly the smaller ones, are benefiting and are one of the best performing assets of the year. The tariff and critical minerals crises are forcing governments into more reasonable treatment of development applications. Combined with rising prices of the underlying metals, markets are starting to reevaluate their years of under-performance. The summer has not typically been favourable to this asset class. Perhaps some value will present itself in the fall.
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.