November 2018

Monthly Equity Monitor


“Based on October’s global stock market rout, investor concerns are not isolated to just emerging economies anymore. Investors seem to understand that the escalation in the U.S.-China trade war could have ripple effects across global supply chains, hurting trade volumes and hence world GDP growth in the process. Europe’s old problems are also resurfacing with uncertainties to the economic outlook courtesy of Brexit and Italy’s populist policies. The U.S. dollar’s persistent strength is not helping either because it raises odds of default amidst record amounts of USD-denominated debt held worldwide. As such, we expect global growth to be no better than 3.7% this year and next.”

• “With another strong quarter under its belt, the U.S. economy is well on track to register its highest annual growth rate in years. A tight labour market finally seems to be pushing up wages, fueling concerns about inflation. As such, the Federal Reserve is likely to stick with its approach to gradually normalize monetary policy over the near term. But with the effects of fiscal stimulus expected to fade, U.S. GDP growth and hence Fed tightening should pace down in 2019.”

• “The Canadian economy remains well on track to grow about 2% this year despite an expected moderation in the third quarter. Reduced trade-related uncertainties courtesy of the USMCA, expectations of accelerating wages amidst labour shortages, the stabilization of the housing market, and generally positive signals from businesses about investment, have all made the Bank of Canada more confident about the economic outlook, which explains the central bank’s increasingly hawkish signals. We continue to call for three more interest rate hikes before end- 2019, which would put the overnight rate in the lower end of the estimated range of 2.50%-3.50% for the neutral rate.”

***This extract from Monthly Economic Monitor, Highlights, National Bank, Financial Market, November 2018

Krishen Rangasamy

Senior Economist

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