Mackenzie Minute: January 26, 2018
Associate Portfolio Manager Graham Meagher says the Mackenzie Ivy Team is monitoring Canada’s housing market for any weakness following a recent hike in interest rates.
GRAHAM MEAGHER: The Bank of Canada raised interest rates by 25 basis points last week (Jan. 17, 2018), to 1.25%. That was the third rate hike in the last six months and at Ivy we are supportive of central banks removing what we consider to be excess monetary stimulus. Unfortunately, other global central banks, such as Japan and Europe, continue to print money, which artificially inflates global asset prices and makes it harder for us to find value.
We’ll be watching the Canadian housing markets and last week, lenders were quick to raise mortgage rates and that, combined with more restrictive lending policies implemented in January and an already highly indebted Canadian consumer, we could experience some weakness in the near term.
Specifically for the Canadian banks, we could see a moderation in mortgage growth, offset by slightly higher margins. Overall at Ivy, we remain cautious given our long-term view for normalization of both interest rates and valuation, and potentially a recession. Now that may seem conservative to those with top-down view but given our discipline at Ivy, we believe it’s the right thing to do to protect our clients’ capital.