Variable will be the winner for the next couple of years. The Bank of Canada came out on October 19th and decided to keep interest rates unchanged. This was no surprise. What may have been slightly surprising to those focused on the consistent gains of the North American equity markets was the language used in the statement that followed the decision. The Bank of Canada revised its forecasts for growth downward for 2012, leading us to believe that they see something on the horizon that will slow Canadian growth.

The Bank realizes that the eventual reduction of stimulus being poured into the Untied States will have a dramatic effect on the Canadian economy. In this current term of economic uncertainty the United States Government is propping up its economy with incredible sums of money. Some of this money is very transparently entering the economy through mortgage buy back plans, cash for clunkers, employment generating schemes, and infrastructure spending. The rest of it is entering the economy a little more secretly, through debt and equity market purchases by the Federal Reserve. Once these schemes are relaxed, or as the Federal Reserve would have us say, “When quantitative easing is reduced”, surely some change will occur? Continue reading →