As interest rates continue to put pressure on mortgage costs, the Bank of Canada predicts home prices will continue to fall before sales pick up later this year.Justin Tang/The Canadian Press
Getting caught up on a week that got away? Here’s your weekly digest of The Globe and Mail’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
High interest rates will continue putting pressure on Canada’s housing market
The Bank of Canada this week increased interest rates for the eighth consecutive time but said that it expects to hold off on further hikes to “assess whether monetary policy is sufficiently restrictive to bring inflation back to the 2-per-cent target.” As Mark Rendell reports, the central bank raised its benchmark rate by a quarter of a percentage point, bringing the policy rate to 4.5 per cent, the highest level since 2007. With borrowing costs and mortgage rates at their highest level in years, many potential homebuyers have been shut out of the real estate market, writes Rachelle Younglai. The typical home price across the country is already down 13 per cent from its peak last February amid the bank’s attempts to rein in runaway inflation by reducing access to cheap loans. As such, the bank is predicting home prices will decline further before sales pick up later in the year.
These stocks offer portfolio stability amid rising prices
Rising interest rates were the main contributor to the woes of the stock markets in 2022. Interest-sensitive securities such as REITs, utilities, telecoms and bonds all tumbled as rates steadily increased. Combined with the collapse of tech stocks as the economy that benefited from pandemic lockdowns dissipated, we ended up with all the major stock markets in the red, and the Canadian bond market experiencing its worst loss in four decades. But there were some inflation-beaters. Gordon Pape looks at a number of inflation-beating securities that thrived in a rising price environment and are still doing well, although momentum is slowing.
The clearest sign that inflation is declining
When assessing inflation, central bankers and economists will often exclude food and energy costs, but in a recent report, Karyne Charbonneau, executive director of economics at CIBC Capital Markets, said the Bank of Canada should consider the rapid climb in mortgage interest costs “when judging the underlying inflationary trend.” As Matt Lundy writes, while the bank is raising interest rates to cool demand and tamp down inflation, its efforts are having the opposite effect on mortgage payments, which have jumped 18 per cent in the past year. Although mortgages carry only 3-per-cent weight in how the Consumer Price Index is calculated, the increase is substantial enough that mortgages are now the largest contributor to annual inflation.
Could lower cellphone and internet costs be coming?
Lowering cellphone and internet bills is a top priority for Vicky Eatrides, the new chair of Canada’s broadcast and telecommunications regulator, Irene Galea reports. Unfortunately, Ms. Eatrides is inheriting a commission that is widely seen as slow to make decisions. The continuing legal proceedings of Rogers Communications Inc.’s takeover of Shaw Communications Inc. are attracting unprecedented attention to the inner workings of the telecom industry and the future of cellular service competition in Canada. Meanwhile, two CTRC policies, concerning industry rates for broadband and wireless networks, finalized during the previous chair’s term, are still being debated among industry players. Ms. Eatrides would not reveal specifics related to her plan to lower cellphone and internet costs, but added she hopes to speed up the commission’s decision-making process.
The real savings of owning an electric vehicle
With gas prices yo-yoing this past year, are the savings associated with the lower operating costs of purchasing an electric vehicle ultimately worth it? David Berman, a Hyundai Ioniq 5 owner, compares charging costs for EVs to gas-powered vehicle costs over the same travelling distance. “I’ve driven almost 10,000 kilometres – did I mention that I don’t drive much?” he writes. “I’ve saved about $780 over the past year. Over 10 years, these savings would rise, theoretically, to a total of $7,800.” Additionally, he got a $5,000 federal EV rebate when purchasing the car in Ontario in early 2022, whittling down the nearly $50,000 list price for his vehicle to about $37,200 compared with a hypothetical gas-burning version of itself.
Record-low rental vacancy rate
There are fewer apartments available to rent in Canada than at any time since 2001, according to Canada Mortgage and Housing Corp’s annual rental report released this week. As Rachelle Younglai reports, the country’s apartment vacancy rate dropped to 1.9 per cent in 2022– down from 3.1 the year before and the lowest level in more than two decades – owing to higher net migration, the return of postsecondary students to the campus and the spike in borrowing costs. The country’s largest rental markets were under particular stress, with Toronto’s apartment vacancy rate dropping to 1.7 per cent last year from 4.4 per cent in 2021, Montreal to 2.3 per cent from 3.7 per cent and Vancouver to 0.9 per cent from 1.2 per cent. The national average monthly rental price for a two-bedroom rose 5.6 per cent to $1,258 last year, with Vancouver and Toronto commanding the highest rents at an average of $2,002 and $1,765 monthly.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
