In this Q&A, Tal says it’s not unthinkable’ that inflation will soon be below target. He says the window to buy a condo will last a year
Investors are on edge, with growing recession fears and uncertainty surrounding corporate earnings growth. These concerns, along with high valuations, are fuelling rising volatility in the stock market.
When the bank is cutting now, it is not stimulating, it’s reducing tightness. You have something called the neutral rate – above this rate, you’re limiting growth, you’re tightening conditions. Below that rate, you’re stimulating activity. We are still above this neutral rate in a very significant way.
At the same time, demand is not there. Because of that developers are not building. The economics of new development, what we call presale or pre-construction does not work, which means that you don’t see any activity. I suggest, at least for the next six months, there is further downward pressure on condo prices in the resale market. I will not be surprised if it continues to go down by five, six per cent over the next six months, eight months or so, and then stabilize. Then, we start going up a year and a half from now, two years from now. That’s the way I see it.It seems that inflation is basically under control.
When it comes to inflation and the speed at which the Bank of Canada is going to cut, one big thing has changed since we last talked and that is the U.S. economy. I will look at the speed at which the housing market is recovering. From the past, we know that we should not underestimate the ability of the housing market to recover fast. So that’s something that can trigger the question about how quickly the Bank of Canada should be cutting.Another thing, which is linked to the equity market, but one thing that I will be watching is the amount of money in GICs. GICs are linked to interest rates.
What will be the largest changes to your Canadian and U. S. economic forecasts if Harris wins the upcoming U.S. election? And the same question but if there is a Trump victory? This means that Trump will have to go after emerging markets as well. Mexico will be a victim, for example, of his policy. That’s something that is a risk. However, remember, 35 per cent of U.S. exports goes to emerging markets, which means that if you create a trade war with those emerging markets, you are really risking the U.S. export market. You’re risking the manufacturing sector. The cost to the U.S. will be significant.
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