Monthly Market Insights: June 2018

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:

 

Birds Flock Together Until…. During the Financial Crisis of 2007-08, it took a coordinated effort by the world’s central banks to stave off a global economic collapse not seen since the Great Depression eight decades earlier. Almost ten years later, the same central banks have begun to take different monetary paths contingent upon the health of their respective economies. The Bank of Canada in late May opted to hold rates for a third straight month after multiple increases, while the U.S. Federal Reserve just recently increased rates for a second time this year with two more expected to come. European Central Bank president Mario Draghi has decided the central bank for the single currency will shutter its monthly bond buying program at the end of 2018. Over the course of the three years of stimulus, the ECB has purchased over €2.5T in debt instruments and will soon face the task of getting if off their balance sheets. Lastly, the Bank of Japan, maintained an ultra-easy monetary policy as its economy, despite some improvements, continues to lack consistent growth momentum. BOJ Governor Haruhiko Kuroda provided no indication of when he would stop the stimulus, but it will not likely be for some time. After years of flying along the same path, some central banks have taken to head in a different direction.

Paving the Way. For a second month in a row, the economy had a net loss of jobs, albeit a small number, but a decline nonetheless. In May, 7,500 positions were lost, mainly of a full-time nature, and coupled with the 1,500 in April it poses the question: ‘Why?’. One reason is the possibility of global trade wars initiated by U.S. protectionist measures that are forcing the hand of employers in attempts to position themselves for potential slowdowns in new orders and work. By shifting jobs from full-time to part-time, employers can quickly to changing business conditions. Another reason is wage inflation or how fast wages have risen over a period of time. Reported on an annual basis, the latest reading by Statistics Canada showed a 3.9% increase YoY, the largest since April 2009. The data supports the fact that the labour market continues to tighten and the economy is operating at capacity utilization of 86.1% in Q1, a 12-year high. With unemployment at a four decade low of 5.8%, static for the past four month, the path is clear and the probability is high for the Bank of Canada to announce a rate hike at their next policy meeting in July.

Read the full June 2018 Market Insights. 

Read previous Market Insights:
May 2018
April 2018
March 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.