Surrey Business News

Re­ces­sion Risk

- Business · Finance · U.S. News · Canada News · Politics · Employment · Society · United States of America · Donald Trump · Federal Reserve System · Twitter · Jerome Powell · U.S. government · Bank of Canada · Canadian Imperial Bank · Bank of America · Brian T. Moynihan

All of the eco­nomic and mar­ket chat­ter through the fi­nal sum­mer months seemed fo­cused on whether a re­ces­sion is loom­ing, and whether it will be a re­sult of pol­icy mis­steps (po­ten­tially led there by one global su­per­power and their bom­bas­tic pres­i­dent). It seems some­what pedan­tic wait­ing for a shoe to drop as we’ve seen global eco­nomic in­di­ca­tors sig­nal fac­to­ries and man­u­fac­tur­ers out­put cut­ting back and other signs that of­ten pre­cede re­ces­sion. Still, the ace in the hole has been, and (for now) con­tin­ues to be the strength in the US labour mar­ket.

For many, this had been the co­nun­drum over the Sum­mer months. In ag­gre­gate, the US econ­omy (and here in Canada) con­tinue to look rel­a­tively strong. We can also cite in­di­ca­tors that show rea­son for con­cern, and those seemed to be con­cen­trated around the busi­ness sec­tor and their spend­ing and in­vest­ment plans, but job mar­ket ac­tiv­ity has yet to ex­hibit signs of weak­ness.

As the dis­cus­sion con­tin­ues over what ex­tent US Pres­i­dent Don­ald Trump is suc­cess­ful in jaw­bon­ing the US Fed­eral Re­serve and in­flu­enc­ing the di­rec­tion of their pol­icy, he’s made the epiphany that all he had to do was in­ten­sify trade ne­go­ti­a­tions with Chi­nese of­fi­cials. Es­sen­tially, the Twit­ter tirades and press con­fer­ences crit­i­ciz­ing Fed­eral Re­serve Chair Jerome Pow­ell made for good head­lines, but the on­go­ing un­re­solved trade dis­pute may prove more ef­fec­tive in forc­ing the Fed to cut in­ter­est rates.

Ad­di­tion­ally, the es­ca­lat­ing backand-forth tar­iff an­nounce­ments through Au­gust only fur­ther prompted fi­nan­cial mar­ket volatil­ity and saw a surge in de­mand for safe-haven as­sets. US gov­ern­ment debt traded back to record lev­els and the US yield curve has in­verted to the worst level since 2007. Sim­i­larly, pre­cious met­als proved once again the sought-after as­set in volatile mar­kets as gold made mul­ti­year record highs and sur­passed all-time highs in Cana­dian dol­lars. The ul­ti­mate ques­tion is, what’s it to us here in Canada?

One US in­vest­ment bank sug­gested that although the Cana­dian econ­omy looks rel­a­tively un­scathed to this point, as a com­mod­ity ex­port­ing na­tion, we will ul­ti­mately be im­pacted by wan­ing global de­mand. Fur­ther­more, the Bank of Canada will have no choice but to fol­low the US Fed and cut in­ter­est rates. This will then trans­late to a weaker Cana­dian dol­lar. CIBC econ­o­mists, how­ever, sug­gested fo­cus re­ally needs to stay with the United States (and not global events) as we’ve yet to see a re­ces­sion in Canada with­out there be­ing one in the US.

Bank of Amer­ica CEO Brian Moyni­han re­cently said in an in­ter­view that he’ is not wor­ried about a slow­down as long as the U.S. con­sumer re­mains strong. Of all the in­di­ca­tors, it’ll be the US job mar­ket that will paint the pic­ture.

 ??  ?? Robert Levy
Robert Levy

Newspapers in English

Newspapers from Canada