Canada promises to ramp up defense spending, met NATO target much earlier
TORONTO, June 9 (Reuters) - Canada's Liberal government will pour extra billions into its armed forces and hit NATO's 2% military spending target this fiscal year, much earlier than scheduled, Prime Minister Mark Carney said on Monday.
Canada has been under heavy pressure from the United States and other NATO allies for years to increase funding for its military. Canada currently spends about 1.4% of GDP on defense.
"Now is the time to act with urgency, force, and determination," Carney said in a speech in Toronto. The previous Liberal governent had promised to hit the NATO target by 2032.
Canada will boost pay for the armed forces and buy new submarines, aircraft, ships, armed vehicles and artillery, as well as new radar, drones and sensors to monitor the sea floor and the Arctic, Carney said.
((Reuters Ottawa editorial; david.ljunggren@tr.com))
Keywords: CANADA POLITICS/DEFENSE
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In both instances, the ultra-low ERP precipitated a steep equity drawdown and sharp fall in long-dated bond yields. "The U.S. equity risk premium ... is exceptionally low by historical standards," they wrote in their five-year outlook on Tuesday. "A mean reversion to a higher equity risk premium typically involves a bond rally, an equity sell-off, or both." But reversion to the mean doesn't just happen by magic. A catalyst is needed. Equities have recovered largely because they were oversold in April, trade tensions have been dialed down, and investors remain confident that Big Tech will drive solid AI-led earnings growth. So even though huge economic, trade, and policy risks continue to hang over markets, there is no sign of an imminent catalyst that would cause an equity market selloff. CHEAP FOR A REASON The flip side of equities looking expensive is that bonds look like a bargain. Indeed, the relative divergence between stocks and bonds is such that, by one measure, U.S. fixed income assets are the cheapest relative to equities in over half a century. Using national flow of funds data from the Federal Reserve, retired strategist Jim Paulsen calculates that the total market value of U.S. bonds as a percentage share of the total market value of U.S. equities is the lowest since the early 1970s. "Since the aggregate U.S. portfolio is currently aggressively positioned, investors may have far more capacity and desire to boost bond holdings in the coming years than most appreciate," Paulsen wrote last week. But bonds are 'cheap' for a reason. Washington's profligacy – the reason ratings agency Moody's recently stripped the U.S. of its triple-A credit rating – and inflation worries have kept yields stubbornly high. The term premium - the risk premium investors demand for holding long-term debt rather than rolling over short-dated loans - is the highest in over a decade, reflecting concerns about Uncle Sam's long-term fiscal health. And the diagnosis here shows no signs of improving. Trump's 'Big Beautiful Bill' is expected to add $2.4 trillion to the U.S. debt over the next decade, according to the nonpartisan Congressional Budget Office, likely putting more upward pressure on yields. Of course, equity investors do seem to be pricing in a very rosy scenario, and the past few months have shown how quickly the market landscape can change. The U.S. economy could weaken more than expected, the trade war could escalate, or there could be a geopolitical surprise that causes bond yields and equity prices to fall. Investors should therefore be mindful of the warnings being sent by ERPs and other absolute and relative valuation metrics. However, they should also remember that stretched valuations can get even more stretched. As the famous saying goes, markets can stay irrational longer than investors can remain solvent. What could move markets tomorrow? * India CPI inflation (May) * UK trade (April) * UK industrial production (April) * ECB's Jose Luis Escriva and Frank Elderson speak atseparate events * Brazil retail sales (May) * $22 billion U.S. 30-year Treasury note auction * U.S. weekly jobless claims * U.S. PPI inflation (May) Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (By Jamie McGeever; Editing by Deepa Babington) Error al recuperar los datos Inicia sesión para acceder a tu cartera de valores Error al recuperar los datos Error al recuperar los datos Error al recuperar los datos Error al recuperar los datos
