Economic Outlook

on Saturday, 9 January 2021 12:11

“The policies of the government in power, and the proclivities of the current prime minister, are not particularly oriented towards the hard work of generating economic growth, and that can make things difficult for the Department of Finance.”
David Dodge, Former head of the Bank of Canada

Greater Vancouver Detached Real Estate And Condos Are Both Flat From 3 Years Ago

Posted by BetterDwelling

on Friday, 8 January 2021 8:30

Greater Vancouver real estate is seeing big price growth, but it hasn’t made up for lost ground yet. Real Estate Board of Greater Vancouver (REBGV) data shows prices generally increased in December. Some segments even printed very large year over year gains. However, the board’s data also shows prices are still around where they were three years ago.

Greater Vancouver Real Estate Price Rise Over 5%, But Still Flat From 3 Years Ago

Greater Vancouver real estate prices climbed last month, bringing annual gains closer to where they were a few years ago. The composite benchmark price reached $1,047,400 in December, up 0.3% from the previous month. Prices are now 5.4% higher than the same month last year, and about 0.2% from 3 years ago. Fairly substantial gains for the composite, but still just regaining ground from a few years ago. CLICK for complete article

Investing Pros And Cons Of A Blue Washington

Posted by Wayne Duggan

on Friday, 8 January 2021 8:26

The SPDR S&P 500 ETF Trust rallied once again on Thursday, and investors are clearly feeling optimistic about the economy’s near-term outlook after Democrats successfully gained control of the Senate earlier this week.

While a Democratic “blue wave” in Washington is certainly bullish for the market in several key ways, Commonwealth Financial Network chief investment officer Brad McMillan said Wednesday there are both pros and cons to Democrats running the show.

Blue Wave Pros: The biggest near-term pro for investors is that Democrats now have a clear path to more aggressive stimulus measures, including the possibility of $2,000 stimulus checks. McMillan said the federal government would likely also provide much-needed help for state and municipal governments.

In the longer term, McMillan said investors can expect increased infrastructure spending and more constructive trade policy following four years of isolationist policies from the Trump administration.

Blue Wave Cons: While Democratic policies could serve as a major tailwind for many companies, the impact of the blue wave is not all positive. CLICK for complete article

Blain’s Morning Porridge – Jan 7th 2021: Really?

Posted by Bill Blain

on Thursday, 7 January 2021 10:04

“There is nothing quite so fanatical as an American telling you what he believes you should believe.”

Well… that was an interesting afternoon..

As bloody revolutions go… aside from one regrettable death; the Storming of the Capitol was a bit of damp squib. It didn’t pass muster as a coup, and wasn’t even a very convincing insurrection. But, it will go down in history as the day the Republican Party woke up – and that’s probably a darn good thing for everybody. It was, hopefully, the day Americans saw Donald Trump for what he uselessly is.

That’s the way markets are thinking – looking past the bluster they see it as positive for reflation, stocks and anticipating growth as Treasuries rose. After Georgia and Confirmation, Joe Biden will be the next president with a working mandate and majority to get things done. Yay! Finally…

There will be further increases in budget spending – which will be required in the face of the second pandemic threat. There will be regulation of big tech – but that won’t undo the ongoing tech revolution which will continue to deliver stellar returns and make our lives better and different. Biden’s new administration will have massive challenges to address – not least in the infrastructure promises Trump failed to deliver, but in terms of stopping the social decay blighting the urban hubs in California, New York and Chicago. Education, Wealth and Equality will be brought to the fore. There will be much talk about taxing the rich – which is not a bad idea… Rebuilding trust in politics will be a massive ask…CLICK for complete article

The Fed is Juicing Stocks

Posted by Michael Lebowitz

on Thursday, 7 January 2021 9:59

We came across the following bullet points from a Seeking Alpha article titled- The Fed is not Juicing the Stock Market.

  • It makes for a great headline, but the Fed is not the cause of this rally.
  • Every dollar the Fed has pumped into the economy is spoken for, and it is not in equities.
  • The truth is a lot more boring and scary than the conspiracy theory.

After explaining how the Fed is not culpable for rising stock prices, the author ends the article with the following challenge: “So please, I invite anyone to explain to me, like I was a 5-year-old, what exactly is the mechanism that explains “the Fed is juicing the market,” when we know exactly where all the Fed’s money is, and we know that it isn’t in the market.”

We are always up for a challenge.

The following article describes four ways in which the Fed juices the stock market.

Draining the Asset Pool

The Fed conducts monetary policy by governing the Fed Funds Rate. To do this, they buy and sell Treasury securities via open market operations. When the Fed wants to lower rates, they buy Treasury debt. In doing so, they reduce the supply of investible debt, making remaining debt more expensive (lower yield). They most often buy or sell short term Treasury Bills to affect the short term Fed Funds rate. Open market operations also add or drain the banking system’s liquidity to help further hit their target.

More recently, with Fed Funds at zero percent, they have conducted QE or large-scale asset purchases. These operations help manipulate rates across the maturity curve and not just Fed Funds. QE, as with traditional open market operations, reduces supply, boosts prices, and lowers yields.

With knowledge of the Fed’s modus operandi, let’s go swimming…CLICK for complete article