Human Sentiment

Steve Saretsky -

Human sentiment is a fascinating beast. Sudden fears of contagion sent markets tumbling this past week, vaporizing $6 trillion in global stock market wealth, and setting off negative economic feedback loops that have raised credible fears of a global downturn. The S&P 500 sank 11.5% for the week, the fourth largest weekly drawdown for the index since World War 2. Back home, the TSX slid 8.9%, the worst week since the financial crisis.

Ultimately begging the question, now what?

There is now widespread belief central banks will come to the rescue. Federal Reserve Chairman Jerome Powell is already standing by ready to cut interest rates after saying Friday that the U.S. central bank will “act as appropriate” as the virus poses “evolving risks” to the economy. Apparently there is no issue cheap money can’t solve, including global pandemics…

While it seems highly doubtful cheaper interest rates will force consumers out of quarantine, nor relieve supply chain disruptions, it may at least provide a temporary relief to financial markets. Even still, the global economy was already slowing prior to this black swan event.

Canada’s economic growth slowed to an annualized rate of 0.3% in the fourth quarter, the worst performance in almost four years. This could finally prompt Bank of Canada Governor Stephen Poloz to the chopping board on March 4th. After all, this is the kind of  “economic shock” that Poloz has been warning could eventually trigger a crisis in household debt imbalances.

Ironically, in typical Canadian fashion, virus panicked mobs of weekend shoppers are looting local Costco stores in the morning, and flooding open houses in the afternoon. The lust for Real Estate remains unfazed, at least for now…

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022