Chill

It was 14 degrees in Vancouver. Sixteen in the Six. Even the snow in Atlantic Canada was being turned to mush in the February sun. Of course, as the mercury levitates, so do the hormones.

Rutting season may come early this year. Wages are up. Stocks are soaring. The economy of both Canada and the US is in far better form than anyone expected a year ago. And while this is apparently beyond the ken of many broken souls who shuffle into this blog’s comment section looking for hugs and warm socks, it’s reality. This is a soft landing. It’s unique and good. Stop moaning.

Let’s review stuff.

The S&P 500 (the only stock index that really matters) passed 5,000 for the first time a few days ago. It is being fed by corporate earnings (80% of companies have been ‘beats’), as well as the ascendancy of the Magnificent Seven techy giants along with the unbridled promise of AI.

World stocks are at a two-year high, despite Putin, Netanyahu, Xi, Kim, Ukraine, Gaza and Trump. Bond yields have been edging higher reflecting sentiment that Fed cuts will come more slowly than anticipated. (The odds given for a rate pause in March – no reduction – are 84.5%.) Strong US economic growth means more corporate earnings, and that’s tempering disappointment with interest rates. So stocks keep swelling.

The American economy has been growing at a torrid 3%+ clip for the last six months (annualized). The jobless rate has stayed stuck in the 3% range – incredible after eleven Fed hikes. And tomorrow the latest US inflation rate may come in as a Taylor Swift touchdown. Says rockstar economist Derek Holt: “The year-over-year rate should be down to 2.8% from 3.4%.”

Meanwhile the Toronto real estate board’s chief wizard a couple of days ago forecast a big, fat 17% surge in sales this year, to 77,000. Says data freak and agent Scott Ingram, “It’s a bounceback year after last year’s 65,936 was the lowest since 2000.”

Big sales do not necessarily mean big prices. That depends on the cost of a mortgage, but lately money in the sub-5% range has been a lot more readily available.

By the way, Scotiabank’s Holt also says this about Canadian real estate this spring: “Canadian housing is just getting started.

“Housing data will figure prominently, though rarely impacts financial markets in the short-term. Another large gain in existing home sales is expected to be reported for January on the heels of the 8.7% m/m SA surge in December. This expectation is based upon tracking across individual cities such as Toronto, Vancouver, Montreal, Calgary, and Quebec City. Continued momentum is expected with one reason being high immigration and a very tight rental market coupled with high and rising intentions of all renters—especially new arrivals—to purchase a home over the coming year. That is to be placed in the context of a severe housing shortage.”

As this blog has argued, we have a crisis of affordability more than one of supply. There are still 22,000 unsold new condos in Toronto alone and 232,800 active MLS listings across the country – now multiplying hourly. There are lots of homes. Just not many that most people can buy.

As for the financial markets, let ‘em rip.

“Solid economic data in recent weeks, ongoing expectations that we’re on the verge of an easing cycle, and rock-solid earnings results are all supporting the market,” says BMO econ Robert Kavcic, in pointing out the earnings gush. “At the same time, earnings growth is now pegged at 9% y/y for the S&P 500, a firm upward revision from 4.7% y/y at the start of the year. Suffice it to say that corporate America is churning out good numbers and topping the expectations bar.

“Where is the strength? It’s fairly widespread across sectors. Positive surprise rates are topping 80% in consumer staples, energy, health care, industrials and technology. Indeed, 85% of tech companies have topped expectations so far this season.”

In short, things are fairly ducky. Strengthening economy. Lots of jobs. Incomes rising. Inflation easing. Soft landing coming. Financial markets robust. Portfolios rising. And 2024 will still be bringing rate cuts. Maybe in the summer rather than the spring, given all the economic buzz. But coming, nonetheless.

So lighten the hell up.

About the picture: “Here is Logan,” writes Larry. “He’s a 1 yr old male golden retriever. He is always on the go! He was bred and lived in Florida for his first 7 months , and is now experiencing his first Canadian winter.”

To be in touch or send a picture of your beast, eail to ‘[email protected]’.