An economy ready for a rate increase

Today was a big day for the global economy – news this morning reflected the November increase in US employment. The positive change from October's job gains has given the market steam to move upward. The Federal Reserve meeting is December 16th, and we expect a rate increase.

Unemployment has declined in the USA: 


(Source: Bloomberg)

We are now more confident than ever that the US Federal Reserve will raise interest rates for the first time since 2007 - away from crisis scenario levels, and indicating a strong economy. Unemployment rates have fallen continuously and that it is time for a rate increase.

Interest rates remain at crisis levels:

(Source: Bloomberg)

We also have proof that the US consumer is ready for an increase in rates, as they have used the low interest period to reduce their debt load and clean their balance sheet. The US consumers' debt levels are the lowest they have been in years - this is positive for the economy.

US Debt loads have fallen:


(Source: Bloomberg)

We are excited about this increase in interest rates, actively modifying the portfolios to take advantage of an increasing interest rate environment - we are confident in our positioning for 2016.

 

That being said, we are going to send out some alarm bells on debt. In Canada, we have done the exact opposite of the Americans and have levered up our balance sheets. We have the highest debt levels in years and although an interest rate increase in the US does not immediately affect our debt, we want to remind everyone that Canada will eventually follow the US, and the cost of our own debt will increase. We encourage everyone to remind family, friends and colleagues to watch their balance sheets. Debt costs will go up, and statistically speaking, those of us in Canada are at risk. Although time is on our side, the warning should be taken seriously.

Household debt in Canada remains at highs - be careful, warn others:


(Source: Bloomberg)

We look forward to a terrific 2016. Call us if you have any questions.

 

Chris

416-572-5429

 

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