Monthly Market Insights: December 2018

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Every month, Cambrian shares the Monthly Economic Commentary provided by our partners at Credential Financial Inc.. If you're looking for advice or have questions about the Monthly Economic Commentary, advisors are here to answer your questions.

Key Takeaways:


A New Leaf. In March 2015, the European Central Bank (ECB) helmed by its president Mario Draghi, introduced an asset purchasing program aimed at fighting deflation in the Eurozone and to instill confidence in the Euro currency that was on the cusp of collapsing. Fast forward to December 2018, all eyes and ears were on Draghi again as he announced an end to the EU-version of QE where the ECB purchased €2.9T of bonds adding liquidity to a now firmer financial system. Leveraging off data showing a looming growth concern of world economies, some criticized whether the timing to stop QE was right or not. In his defense, Draghi iterated that the economy is strong enough to weather a slowdown, existing government bonds would continue to be repurchased and rates would remain at ultra-low levels, until at least Summer 2019. This is similar to the U.S. Federal Reserve who stopped QE3 in October 2014 and began raising rates in December 2015. At their final meeting in December 2018, they are expected to hike rates again but under a more dovish tone. For the ECB, it is a new era where accommodative monetary policy will soon come to an end.

Wages wanted.
Employers were able to fill help-wanted openings more than census expected as Statistics Canada reported over 94,000 people found work in November, pushing the national jobless rate to a four-decade low. Almost all jobs were of the preferred full-time nature that provides stability to the labour market as the number of people looking for work, the participation rate, edged higher to 65.4% of the eligible work force. However, despite the favourable headline numbers, the wage growth, or lack thereof, is what garnered a lot of interest. The rate of increase of wages, or wage inflation, was 1.46% in November on a year-over-year basis, which is slower than October’s 2.19%; yet even more concerning is that it’s below the rate of inflation of roughly 2%. This puts the Bank of Canada in a bind of keeping price growth in check through adjustments in interest rates while trying to not affect wages negatively. If this downward wage trend continues, the central bank will likely still to a more dovish stance to future hikes, especially with the recent decline in oil prices and unrelenting trade tiffs globally.

Read the full December 2018 Market Insights. 

Read previous Market Insights:
November 2018
October 2018
September 2018

*The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell any mutual funds and other securities.