In a recent interview with Jim Thorne, Chief Market Strategist at Wellington Altus Private Wealth, the topic of interest rate cuts by the Bank of Canada was discussed. Thorne believes that there is a high probability of rate cuts in July and September, with the credit markets indicating that the next two meetings are “barely live.” This prediction aligns with Thorne’s earlier forecast of three rate cuts for the year.
Thorne also delved into the impact of these potential rate cuts on the Canadian economy, highlighting the inverted yield curve and the lack of credit creation in the private sector. He expressed concerns about the economic growth being a “mirage” fueled by excessive government spending, which could lead to an “airpocket” of growth once the spending stops.
Despite the potential challenges ahead, Thorne commended Bank of Canada Governor Tiff Macklin for taking the bold step of cutting rates, even in the face of opposition from Bay Street. Thorne emphasized the importance of staying ahead of the curve and building portfolios that can weather the storm of economic uncertainty.
As the discussion turned to investment opportunities, Thorne raised questions about the Canadian market’s performance compared to the US market and the potential for a relief rally in bond proxies. He cautioned against investing in companies that rely on debt issuance to pay dividends, highlighting the risks associated with such a business model.
Overall, Thorne’s insights shed light on the complex interplay between interest rates, economic growth, and investment strategies in the current market environment. As investors navigate these uncertain times, Thorne’s advice to stay vigilant and strategic in portfolio management rings true.
