With the economy in lockdown during March and April, Canada’s GDP dropped a record -18.2% due to the COVID-19 pandemic. Although not surprising, when compared to the Spanish Flu period and an economy that was much smaller in 1919, the impact of shutting down a consumer driven economy is stark. The good news is that while there are challenges to restarting carefully, it appears Canada has begun to recover, although many economists expect it to be a slower process.
“By just looking at soaring stock markets you wouldn’t know the world economy is on track to grow this year at the slowest pace in a decade…as the MSCI All-Country World index soared to all-time highs in November amid investor confidence about de-escalation of the U.S.-China trade war.“
2020 begins with geopolitical fireworks in escalating tensions between Iran and the U.S. Oil prices shoot upwards of 4% or more. It is easy to forget that Brexit looms while the first phase of China-U.S. trade signals a deescalation in tensions.
GDP prospects for Canada in 2020 are forecasted to be similar to 2019. National Bank Financial Economics with an above-consensus call of 1.8% for 2020 real GDP growth. They assume some fiscal stimulus from the federal government. Barring a significant deterioration in the global economic outlook, National Bank Financial continues to expect the central bank to refrain from cutting interest rates over the near to medium term.
Recent weeks have offered a large amount of economic news to digest from the Bank of Canada and more. Here are a few recent economic events:
A disappointing surprise in Canada’s low monthly employment figures yet overall holding at 3.6% annual rate
A hold in the Central bank rate at a remarkably low 1.75%
Outlook for slow and steady growth prospects for 2020 at 2% GDP
Inflation that appears to be under control in Canada (2.6%) and the U.S. (2.9%)
Pending approval of USMCA (NAFTA 2.0)
Lets be frank. If any economist proposed these figures five to ten years ago, they would be outliers. The overall economic picture that Bank of Canada (BoC) Governor Poloz describes in the recent report from our Partners at National Bank Financial Economics is optimistic and balanced. Poloz believes the economy remains resilient despite the recent unemployment monthly spike, stating “we (BoC) felt the employment situation in the country remained favourable, with participation rates and wages showing upward momentum.”
Don’t forget to review your investment portfolio as we near the end of the year with your Hampton Securities Investment Advisor. Financial markets have been strong and many indices have reached record highs. Each portfolio has its own target, risk and return objectives. Matching capital gains and losses can be very beneficial from a tax perspective. December 27th, 2019 is the last day to successfully sell for tax loss purposes.