Connecting the Dots II: US Economic Data and Fed Policy
Last week, I talked about how Canadian economic reports connect [link to sept. 13] and impact Bank of Canada (BoC) decisions, which in turn affect investors. This week, I will dive into the American economic reports, exploring how the US Federal Reserve (Fed) uses data to shape interest rates, and what that means for us Canadian investors.
Tag: lspd
Weekly Update for the week ending August 2, 2024
This past week, the US Federal Reserve (Fed) announced that it would keep the benchmark interest rate at 5.5%, a move that was widely expected. However, the Fed also hinted at the possibility of a rate cut in September, as inflation cools and the labour market shows signs of slowing. The Federal Open Market Committee (FOMC) unanimously agreed to maintain the federal funds rate in the 5.25% to 5.5% range, where it has been for the past year.
Weekly Update for the week ending May 31, 2024
This past week, as I reviewed my three portfolios, I was surprised by the number of trades I had made in the past few months – a total of 21 across all portfolios. Unfortunately, all but one were on my TD Direct Investing account, costing me almost $200. While not a significant amount in the grand scheme, it is still $200 less available for investment. ☹️
Weekly Update for the week ending May 17, 2024
With inflation stubbornly high, hopes for lower borrowing costs are fading. After three consecutive months of higher-than-expected inflation, you might be wondering: when will interest rates drop? Despite many anticipating a quicker resolution, the Federal Reserve (Fed) has opted to maintain a steady interest rate of 5.5%, waiting for clear signs that inflation is indeed […]
Weekly Update for the week ending April 5, 2024
Navigating the world of investing often mirrors the emotional rollercoaster experienced by hockey fans as the season nears its end and the draft lottery looms. The dilemma? To wholeheartedly support your team’s victories or, paradoxically, hope for losses if it secures a superior draft spot. This dichotomy is strikingly similar in the realm of investments, where economic news can simultaneously herald positive developments and trigger investor apprehension. Take, for example, the recent labour report from the US: It showed job growth and wage increases surpassing expectations—a testament to a thriving economy and a win for the workforce. Yet, for those keen on seeing interest rates decline, this was a setback. Rising wages, after all, can exacerbate inflationary pressures. The statement by a Federal Reserve official that it is “much too soon to think about cutting interest rates” effectively quashed any hopes for an imminent rate cut, epitomizing the scenario where robust economic health can dampen prospects for those favoring lower interest rates. ☹
Weekly Update for the week ending March 29, 2024
As we headed into March, buoyed by a strong rally, I held high expectations. Known historically as a favorable month for North American stock markets, and with a wealth of positive economic indicators on the horizon, it seemed the stage was set for significant market advancements. Analysts in both Canada and the USA were looking for data indicating robust economies, stable job markets, and decreasing inflation rates going into the month.
Indeed, the March reports did not disappoint. They painted a picture of strong economies and steady job markets across North America, alongside growing investor optimism and diminishing inflation. These developments have heightened investors’ expectations for interest rate cuts by the central banks of Canada and the US come June. Furthermore, with April historically being a strong month for the markets (though it is important to remember that past performance does not guarantee future results), the stage seems perfectly set for a bullish April.
Let us hope the bulls take the lead and run with it. 😊