“Those who say it cannot be done, should not interrupt those doing it” – Chinese Proverb

CMHC Updates Canada’s Housing Market Risk Levels

The Canada Mortgage and Housing Corporation (CMHC) has lowered the country’s housing market from “highly vulnerable” to “moderately vulnerable” in a statement this week. The Crown Corporation reported on Thursday that an “overall easing” of price acceleration led to the lowered risk rating, which had been rated as highly vulnerable for the previous 10 quarters.

CMHC Chief Economist Bob Dugann: “Even though moderate evidence of overvaluation continues for Canada as a whole, there has been improved alignment overall between house prices and housing market fundamentals in 2018.”

Mortgage stress-tests, introduced in 2018, were a major factor in the risk rating change.

It is important to note that while the national rating dropped to moderately vulnerable, there is continued high-level vulnerability in Vancouver, Victoria, Toronto, and Hamilton. These four cities did see a move toward more sustainable levels, CMHC said.

Bank of Canada Rate Update

Last week, the Bank of Canada set its key rate at 1.75% for the fourth consecutive rate announcement, on the heels of five rate hikes between mid-2017 and fall-2018.

BoC head Stephen Poloz was also quiet about future hikes, no doubt with an eye on the sudden economic slowdown in the last half of 2018 (which led to worldwide market pullbacks from July through December).

The moratorium on rate hikes helped to steady the ship, resulting in the rebound we’re currently experiencing.

While the BoC made no mention of future hikes, and indeed inferred a continuing accommodative policy in the near-future, there is a differing opinion out there. Scotiabank VP and Head of Capital Markets Economics, Derek Holt, feels strongly that a hike before year-end is likely. “We still think the [BoC] is not done with its hike cycle, and our current view is a hike by year-end”.

Time will tell if the Bank of Canada ultimately continues with its rate-hold strategy or will look to mitigate recent positive inflation reports via a rate hike later in 2019.

Weekly Update – By The Numbers

North America

• The TSX closed at 16,494, down -120 points or -0.72% over the past week. YTD the TSX is up 15.16%.
• The DOW closed at 26,505, down -38 points or -0.14% over the past week. YTD the DOW is up 13.62%.
• The S&P closed at 2,946, up 6 points or 0.20% over the past week. YTD the S&P is up 17.51%.
• The NASDAQ closed at 8,164, up 18 points or 0.22% over the past week. YTD the NASDAQ is up 23.04%.
• Gold closed at 1,280, down 11.00 points or -0.62% over the past week. YTD gold is down -0.39%.
• Oil closed at 61.87, down -1.00 points or -1.59% over the past week. YTD oil is up 35.00%.
• The USD/CAD closed at 0.745, up 0.0023 points or 0.31% over the past week. YTD the USD/CAD is up 1.66%.

Europe/Asia

• The MSCI closed at 2,154, changed 0 points or 0.00% over the past week. YTD the MSCI is up 14.27%.
• The Euro Stoxx 50 closed at 3,503, up 3 points or 0.09% over the past week. YTD the Euro Stoxx 50 is up 16.73%.
• The FTSE closed at 7,381, down -47 points or -0.63% over the past week. YTD the FTSE is up 9.71%.
• The CAC closed at 5,549, down -20 points or -0.36% over the past week. YTD the CAC is up 17.29%.
• DAX closed at 12,413, up 98.00 points or 0.80% over the past week. YTD DAX is up 17.56%.
• Nikkei closed at 22,259, changed 0.00 points or 0.00% over the past week. YTD Nikkei is up 11.21%.
• The Shanghai closed at 3,078, down -8.0000 points or -0.26% over the past week. YTD the Shanghai is up 23.42%.

Fixed Income

• The 10-Yr Bond Yield closed at 2.53, up 0.0200 points or 0.80% over the past week. YTD the 10-Yr Bond Yield is down -5.95%.

Sources: Advisor.ca, Dynamic

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.