Making sense of the markets this week: March 19, 2023

So, the important thing questions for many Canadians are: “Do I have to care about this? Is my cash secure?” The solutions could also be: “In all probability not. As secure because the Canadian authorities could make it.”

The actions of SVB, regional banks within the U.S. and even Credit score Suisse, should not prone to have an effect on the common Canadian’s funds. There’s some noise on the sides relating to Canadian banks which have some belongings in America, however that’s fairly small potatoes. OFSI is watching carefully to reassure everybody. And it’s stepped in to take management over SVB’s $864 million in Canadian belongings, as famous above within the first part. It’s additionally price trying on the Canadian Deposit Insurance coverage Company (CDIC), because it has you lined as much as $100,000 per account.

Personally, I really feel fairly assured in Canadian banks. Their earnings experiences from two weeks in the past had been very strong. Every of the large six Canadian banks reported setting apart rising quantities of cash to cowl off danger for conditions identical to what we’ve seen with SVB and Credit score Suisse. There are some optimistic systemic causes why Canada has not skilled a banking disaster in a very long time. Given the detrimental headlines regarding all issues banking in the intervening time, it is likely to be an opportune time to get some widespread publicity to Canadian banks through an exchange-traded fund (ETF), just like the Horizons Equal Weight Canada Banks Index ETF (HEWB/TSX).

Supply: Google Finance

Inflation within the U.S.: The place can we go from right here?

Amid all this banking chaos, the U.S. Federal Reserve has a giant determination to make subsequent week, in regard to rates of interest. Extra now, than at every other time previously few a long time, has the U.S. Fed been put between a rock and a tough place. If the central financial institution pauses on elevating charges, it’s fairly potential we might see a bull market in a number of belongings and see inflation ramp its method again up. If it follows by means of on its hawkish warnings, we might see extra structural issues reminiscent of financial institution runs proceed.

To complicate issues extra, the not too long ago launched U.S. inflation numbers don’t depart determination makers with a simple path. Costs in February had been 6% greater than a yr in the past. That’s down a considerable chunk from January’s 6.4% inflation, and fortunately, method down from June’s 9.1% inflation–nevertheless it’s nonetheless far above the U.S. Fed’s 2% objective.


Month-to-month core inflation (which strips out risky meals and power costs) truly ticked upward from January’s 0.4% to February’s 0.5%. The housing sector was chargeable for this enhance.

Every week in the past, CME economists instructed a 30%-plus likelihood that the U.S. Fed could be contemplating a 0.50% fee hike. Given the current occasions, that’s rapidly rotated. Now, not solely is a 0.25% fee hike the favourited odds, however there’s a 28% likelihood that there could also be no fee hike in any respect!

On the first indicators of the Fed reversing financial course, inventory markets rallied, mortgage charges dropped, and bond markets determined fairly rapidly that rates of interest wouldn’t keep “greater for longer.” Maintain on tight for the place we’re headed from right here. For what it’s price, I proceed to consider that Canadian corporations and broad Canadian fairness index funds are a wonderful place to be proper now.

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