Key Highlights
- Inflation is coming down but remains above central banks’ target levels; goods inflation is back to pre-pandemic levels, but housing and services prices are keeping inflation above 2%
- Economic growth and demand for labour have slowed
- The faster-growing US has been the exception, but there are hints that US growth may be softening
- The Bank of Canada has delivered one 0.25% rate cut; further cuts will depend on the Bank remaining “confident” that inflation is continuing downward. Despite the cut, interest rates for longer maturities ended Q2 close to where they started
- In the US, the Fed remains on hold, but markets expect at least one rate cut before year-end
- Equity markets around the world continue to be driven largely by AI optimism, but interest-rate sensitive and defensive sectors are showing some strength
- Long-term bonds are now offering more yield than short-term bonds. Investors might consider taking advantage of rising bond prices if the yield curve moves lower in response to further Bank of Canada rate cuts or a further economic slowdown
As always, given the unpredictability of markets in the short term, we recommend making sure that portfolios are aligned with long-term objectives. If you have any questions about your organization’s investments, please contact your Encasa advisor.