Why Canada’s economy is underperforming
The Canadian economy will continue to underperform over the next year, relative to the U.S. and on a global scale.
That’s due to our high level of consumer debt, and to weak oil prices and exports, says Luc de la Durantaye, managing director of asset allocation and currency management at CIBC Asset Management. He manages the Renaissance Optimal Inflation Opportunities Portfolio.
Even though the U.S. continues to recover slowly, he adds, it will still outperform Canada. As well, the American dollar will outshine the weak loonie.
“Interest rate differentials are an important element of currency movements,” says de la Durantaye. So, “the Canadian dollar [will] continue to be under pressure relative to the U.S. dollar, given the interest rate differential continuing to move in favour of the U.S.”
The U.S. Federal Reserve didn’t hike rates in September, he notes, but “if we continue to see stabilizing economic data, there’s a chance the Fed will [hike later]. That would be supportive for the U.S. dollar.”
Further, he explains, “We don’t expect oil prices to rebound. There’s still excess supply, and that excess supply will take time to change. So you will see oil prices weighing down the Canadian dollar.”
If Canada continues to struggle, says de la Durantaye, “The Bank of Canada may have to continue to consider lowering the central bank rate. That’s going to keep a damper on yield.”
However, both the U.S. and Canada will lag global markets, he predicts. “We’re neutral on both Canada and the U.S., relative to international and emerging equity markets.
Why Canada’s economy is underperforming | Benefits Canada
The Canadian economy will continue to underperform over the next year, relative to the U.S. and on a global scale.
That’s due to our high level of consumer debt, and to weak oil prices and exports, says Luc de la Durantaye, managing director of asset allocation and currency management at CIBC Asset Management. He manages the Renaissance Optimal Inflation Opportunities Portfolio.
Even though the U.S. continues to recover slowly, he adds, it will still outperform Canada. As well, the American dollar will outshine the weak loonie.
“Interest rate differentials are an important element of currency movements,” says de la Durantaye. So, “the Canadian dollar [will] continue to be under pressure relative to the U.S. dollar, given the interest rate differential continuing to move in favour of the U.S.”
The U.S. Federal Reserve didn’t hike rates in September, he notes, but “if we continue to see stabilizing economic data, there’s a chance the Fed will [hike later]. That would be supportive for the U.S. dollar.”
Further, he explains, “We don’t expect oil prices to rebound. There’s still excess supply, and that excess supply will take time to change. So you will see oil prices weighing down the Canadian dollar.”
If Canada continues to struggle, says de la Durantaye, “The Bank of Canada may have to continue to consider lowering the central bank rate. That’s going to keep a damper on yield.”
However, both the U.S. and Canada will lag global markets, he predicts. “We’re neutral on both Canada and the U.S., relative to international and emerging equity markets.
Why Canada’s economy is underperforming | Benefits Canada
