Bank of Canada signals rate hike earlier than expected
The Bank of Canada’s recent announcement was eventful. The BoC announced it was holding the overnight rate at 0.25%; however, BoC Governor Tiff Macklem also said “we will be considering raising interest rates sooner than we previously thought. Interest rates don’t need to be as low for as long to that full recovery and get inflation back (down).”
The BoC will be ending its Quantitative Easing (QE) program in addition to pulling in the rate hike timeline. Originally expected to raise rates by Q4 2022 at earliest, the rate hike timeline has moved to “middle quarters of 2022”.
As recently as 2 weeks ago in our September Market Recap, we noted the BoC felt the inflationary spike was transitory in nature. On Wednesday, the BoC conceded that surging oil prices, coupled with persistent supply-side bottlenecks and manufacturing input shortages (for instance, semi-conductors) have forced the BoC to reconsider its timing.
The BoC’s Monetary Policy Report outlined its revised inflation projection to be 4.8% for the remainder of 2021 before gradually coming back to 2% toward the end of 2022. The full-year 2022 inflation estimate was increased from 2.4% to 3.4%.
How does this affect my portfolio?
In our October E-Newsletter, the article titled The Fixed Income Dilemma outlined some of the options at investors’ disposal. We encourage you to read this article if you are concerned about inflation, rising rates, and how they relate to your portfolio.
If you have had a review meeting with Anthony or Frank recently, we’ve addressed your portfolio already.
We are always here for you and we encourage you to reach out to us with questions.
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Weekly Update – By The Numbers
| North America | Friday Close | Weekly Change | Weekly % Change | YTD % Change |
| Canada – S&P TSX Composite | 21,037 | -179 | -0.84% | 20.67% |
| USA – S&P 500 | 4,605 | 60 | 1.32% | 22.60% |
| USA – Dow Jones Industrial Average | 35,820 | 143 | 0.40% | 17.04% |
| USA – Nasdaq | 15,498 | 408 | 2.70% | 20.25% |
| Gold Futures (USD) | $1,783.90 | -$9.30 | -0.52% | -6.03% |
| Crude Oil Futures (USD) | $83.33 | -$0.84 | -1.00% | 71.74% |
| CAD/USD Exchange Rate | $0.8074 | -$0.0009 | -0.11% | 2.74% |
| Europe / Asia | Friday Close | Weekly Change | Weekly % Change | YTD % Change |
| MSCI World Index | 3,175 | 24 | 0.76% | 18.03% |
| Switzerland – Euro Stoxx 50 | 4,251 | 62 | 1.48% | 19.01% |
| England – FTSE 100 | 7,238 | 33 | 0.46% | 12.03% |
| France – CAC 40 | 6,830 | 96 | 1.43% | 23.04% |
| Germany – DAX Performance Index | 15,689 | 146 | 0.94% | 14.36% |
| Japan – Nikkei 225 | 28,893 | 88 | 0.31% | 5.28% |
| China – Shanghai Composite Index | 3,547 | -36 | -1.00% | 2.13% |
| CAD/EURO Exchange Rate | € 0.6984 | € 0.0045 | 0.65% | 8.57% |
| Fixed Income | Friday Close | Weekly Change | Weekly % Change | YTD % Change |
| 10-Year Bond Yield (in %) | 1.5570 | -0.0980 | -5.92% | 69.98% |
Sources: Globe Investor, Yahoo! Finance, CNBC.com