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The Closing Print show brought together seasoned market enthusiasts Joel Elconin and Rob McLister to dissect the undercurrents of interest rates, inflation, and their broader market implications. Their conversation shed light on the unfolding narratives in both the U.S. and Canadian economies, offering a nuanced perspective.

The discussion dove into the recent remarks by the Fed’s Chair, Jerome Powell, whose testimony didn’t provide much novelty to the market participants. The market, it seems, is as knowledgeable as Powell, with both parties riding on the waves of data dependency. A startling 7% interest rate prediction by JP Morgan stirred debate on its potential impact across sectors including consumer loans and U.S. debt, but is perhaps a nothing burger unless the economy falters significantly.

Shifting focus to Canada, the discussion revealed a more leveraged consumer base and a stressed real estate market. The comparison between U.S. and Canadian housing markets disclosed distinct challenges, bound by a common thread of interest rate sensitivity. Notable concerns surrounded the Canadian housing market, particularly the upcoming wave of mortgage renewals by 2025-26. If interest rates remain high, a storm might be on the horizon. In addition, if current building trends continue, Canada will likely be facing a shortage of 3.5 million homes by 2030.

The dialogue also touched on the stability of Canadian banks, known for reliable dividends yet criticized for their cyclical nature. The anticipated weakness in these institutions during a housing default cycle is also a concern, especially given 30-year mortgages are not that common in Canada.

Rob’s final remarks echoed cautious optimism, underscoring market cyclicality and the essence of data dependency. The discussion painted a picture of economies in flux, with interest rates and housing demand at the forefront of investors minds.