Myles Zyblock, Chief Investment Strategist, Dynamic Funds, discusses and shares his perspective on markets for Q4 2017. On the economic front, he believes that the growth outlook is supportive of markets, and that in addition, tax reform could add a further thrust to the growth fundamental.
"Canada is literally booming, growth in the first half of the year came in at about 4%," he says, "which is outstanding, and if you look across the economy, there's no weaknesses that we see." He doesn't think the 4% growth rate is sustainable, that we're going to see some slowing, as a result of the BoC instituting 50 bps of rate hikes this year, and that should slow the economy down, just a touch. At the same time, since early May, the Canadian dollar has surged by about 10% and that's probably going to weigh on the exporters.
There's no risk to recession in sight, unless of course the risks to the housing market are realized.
The Trump administration proposes tax breaks for companies with large amounts of cash stored offshore to make it easier to repatriate the funds, as well as to provide tax breaks to individuals, and that should be favourable to the economy.
The Canadian housing market is overvalued and consumer debt is relatively high, and what we're starting to see now is the Bank of Canada raising rates, which is going to raise the cost of servicing mortgages which could weigh on the housing market. At the same, the OSFI is encouraging the banks to tighten lending standards, something that's likely to come into effect in 2018. Either of these factors could bring what is a fragile housing market to its knees.
Zyblock goes on the discuss his outlook for Europe, Emerging Markets, NAFTA.
Finally, he discusses how he has positioned funds in the context of his outlook.
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