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Autumn ’13 Meanwhile in Canada…

Dave's Investment Insights Newsletter – Autumn 2013

Written by Dave Lee
October 1, 2013

Viewed through the eyes of the media, the world seems to move from crisis to crisis, as the pundits look for the next story that will grip us with fear: Greece. Cyprus. Syria. Iran. Egypt. Washington D.C.

Searching for drama is great for TV ratings, but it is not the basis for sound investment decisions. Here are the emerging themes that are shaping the Canadian economy now, and will continue to do so for a long time:

We have a relatively strong economy

Compared with the G-7 Countries (Canada, USA, UK, Germany, Italy, France, Japan), we are in a very strong position.

Canada has:

  • Made the most improvement in jobs since the recession
  • Enjoyed the greatest increase in GDP since the recession
  • Maintained by far the lowest public debt per person

We’re on track to balance the books

The federal government expects to eliminate the deficit by 2015.
More importantly, our debt has shrunk dramatically when compared to the size of our economy: Our debt to GDP ratio today (33%) is less than half of the level it reached in 1996 (68%) and continues to trend downward.

Mortgages are growing too quickly

Personal debt levels among Canadians continue to rise at an alarming pace. According to the Canadian Association of Accredited Mortgage Professionals, Canadians owe $1.2 trillion in mortgage debt, up from $664 billion in 2008. In other words, it has nearly doubled in just a few years.

Interest rates will remain low

Savers will continue to feel the squeeze of low interest rates and excessive borrowers will have more time to get their finances in order, as the US Fed is unlikely to raise interest rates until at least 2015, and Bank of Canada Governor Stephen Poloz has indicated that interest rates in Canada are also unlikely to rise for a long time.

Free trade with Europe is coming

Canada and the European Union have reached “an agreement in principle” on a free trade agreement that is expected to add $12 Billion annually to the Canadian economy. It will take at least two years to ratify.

Download the Complete Autumn 2013 Investment Insights Newsletter