Political Positioning And Headlines = Noise

The new NAFTA, now called the USMCA (United States Mexico Canada Agreement) agreed upon at the last minute late yesterday will bring a sigh of relief (at least temporarily) for the Canadian economy and the C$. U.S. president Trump will claim a victory, although other than a change in name there are relatively modest changes to the agreement. Better, however, than the alternative of no deal.

Despite a slightly better than expected July (that was months ago, but we don't seem to be able to put economic data together more quickly in this country) GDP reading, there are still multiple concerns facing the Canadian economy: primarily how to be more tax competitive with the U.S. and retain important businesses that are motivated to move south.

The Bank of Canada may now believe it has room to raise interest rates by another 1/4%. That will make the debt-heavy household and the housing market pause for reflection.

The "reality TV" show that is U.S. politics captured many last week and this is far from over. Up next will be the U.S. mid-term elections and the results could be telling: a better Democratic showing in congress and / or the senate may cause further upheaval.

In the meantime, behind the noise, the most recent economic data in the U.S. shows some mild slowing:

Further, U.S. debt and deficits are rising as are interest rates and recent consumer spending (with household debt at record highs) may likely be feeling it.

The reality of it all is that, as I have suggested on numerous occasions over the last few months, the economic expansion cycle is, as they inevitably all do, drawing to its end. The timing is not exactly specific, but it is best to prepare for its eventuality.

Expect more noise on the political and global trade front in the time being, but we will be closely watching what is happening behind all this and as a result how best to position our and our private client's investments to minimize the impact of potential volatility and maximize opportunities for long-term growth.