A BOC Rate Cut Should Be Good For Canadian Equities

Earlier this week (while we were all watching the Greek situation unfold) Canadian GDP for April was released and while this actually came to pass a couple of months ago, a whole slew of economists who follow the Canadian story have begun to make their calls on the possibility of a July 15 Bank Of Canada Rate cut (by 1/4%) and the potential for a recession (2 quarters of negative GDP growth) has even been mentioned.

more here:

http://business.financialpost.com/news/economy/bank-of-canada-july-rate-cut-back-on-the-table-after-gdp-shocker-economists-say

and here:

http://business.financialpost.com/investing/canada-is-already-in-a-recession-says-bank-of-america-and-the-loonie-is-set-to-get-hammered?__lsa=4ddb-7c92

Looking at all the equity markets on a global scale and how they react to central bank interest rate cuts and other measures of monetary stimulus, I would have to say that this (a cut in the bank rate in Canada) should probably be taken as a positive for Canadian equity markets.

Interestingly, 

• The S&P TSX , year to date, is up a few points, but basically unchanged (1/4% easing occurred in January and possibly another 1/4% coming in July).
• The S&P 500 is also only up a few points (possible interest rate increase coming in the US in September or December).
• The Euro Stoxx 50 is up 10% (and The European Central Bank has been easing aggressively since January).
• The Nikkei 225 is up more than 17% (and the Bank Of Japan has been easing aggressively).

I think I like the odds of the S&P TSX to beat the S&P 500 this year.

Just sayin'.

www.highrockcapital.ca