Latest news with #Kavcic
Yahoo
08-07-2025
- Business
- Yahoo
Posthaste: Canadians might want to brace for bigger federal budget deficit than they thought
Canadians are in the dark about Ottawa's finances as they wait for the budget to be unveiled in the fall, but economists say they should probably brace for a bigger deficit than has been projected. How much bigger? Quite a bit, according to BMO Capital Markets. 'Suffice it to say that both the Parliamentary Budget Officer's March baseline ($46.8 billion deficit) and the Liberal platform ($62.3 billion) are likely underestimating the size of the FY25/26 shortfall,' said Robert Kavcic, senior economist with BMO Capital Markets in a recent note. A lot has changed since Prime Minister Mark Carney won the election, and BMO now estimates the federal deficit could climb towards $80 billion or about 2.5 per cent of GDP. First there are the knowns. Measures in the Liberal platform to offer relief to Canadians are already coming into play, such as the July 1 personal income tax cut, cancellation of the capital gains inclusion rate hike and GST relief for some new home buyers. Then there are the unknowns. The sudden cancellation of Canada's digital services tax after U.S. President Donald Trump broke off trade talks will cost the government about $7 billion in lost revenue, BMO estimates. Defence is another 'major shift.' The increase in defence spending to 2 per cent of GDP this fiscal year and 5 per cent by 2035 means $8 billion more in incremental spending in the 2025/26 fiscal year, said Kavcic. The de-escalation of the trade war with the U.S. and possibility of a deal is good news and means the federal government can likely trim the $3 billion it had earmarked for direct support to those affected by tariffs. On the flip side, the $20 billion Ottawa put down as retaliatory tariff revenue will also likely fall short. 'Given the pause in some measures, and a looming trade deal likely to scale back some others, that figure could come in $10-to-$15 billion lower,' said Kavcic. During the election campaign, Carney said he would slow growth in government spending to about 2 per cent annually, down from 9 per cent under Justin Trudeau. And there are already signs the government is working on it. Finance Minister Francois-Philippe Champagne reportedly sent a letter to cabinet members this week urging them to find ways to cut program spending by 7.5 per cent for the 2026-27 fiscal year, which begins next April. Kavcic said government program spending climbed steadily under Trudeau to about 16 per cent of GDP by 2024/25. Before that, it was relatively stable at about 13 per cent of GDP. 'Now, it's unlikely we're going to see spending retrench back to those levels, as cuts will more likely be back-filled with updated policy priorities,' he said. But if an $80-billion deficit makes your eyes water, the economist offers some context that might help. 'While a wave of red ink is rolling over Canada's budget, it still pales in comparison to the tsunami south of the border,' he said. Trump's One Big Beautiful bill is set to raise the U.S. deficit above $2 trillion next year, more than 6 per cent of GDP. There is also reason to hope that the pro-growth policies behind Canada's deficit — tax relief and infrastructure spending — will boost the economy and have longer-term payoffs, he said. to get Posthaste delivered straight to your wins the 'standout performer' of the 21st century, returning more than 11 times its value from the end of 1999, says Deutsche Bank Research. That's compared to 6.8 times for the S&P 500. The yellow metal also had its strongest first half of the year since 1980. The Canada Mortgage and Housing Corporation will provide an update on rental market conditions in Vancouver, Edmonton, Calgary, Toronto, Ottawa, Montreal, and Halifax Today's Data: United States consumer credit, NFIB small business optimism Carney government's nation-building projects list expected to draw from these five areas, says source How the trade war is turning into a tourism win for Canada Amazon and Walmart go head-to-head in online discount battle It's a tough time to be a 60/40 investor. The model, once a reliable framework for conservative investors, has struggled to provide the downside protection it historically offered, writes investing pro Martin Pelletier. Bonds have failed to hedge equity risk and volatility has become more frequent and more emotionally charged. That's why goal-based investing works in uncertain times, says Pelletier. Find out more Recently, we published a feature on the death of the summer job as student unemployment reaches crisis levels. We want to hear directly from Canadians aged 15-24 about their summer job search. Send us your story, in 50-100 words, and we'll publish the best submissions in an upcoming edition of the Financial Post. You can submit your story by email to fp_economy@ under the subject heading 'Summer job stories.' Please include your name, your age, the city and province where you reside, and a phone number to reach you. Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@ with your contact info and the gist of your problem and we'll find some experts to help you out while writing a Family Finance story about it (we'll keep your name out of it, of course). Want to learn more about mortgages? Mortgage strategist Robert McLister's Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won't want to miss. Plus check his mortgage rate page for Canada's lowest national mortgage rates, updated daily. Visit the Financial Post's YouTube channel for interviews with Canada's leading experts in business, economics, housing, the energy sector and more. Today's Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg. Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@ Here are 5 Canadian cities where you can make less and still buy a home Ready for summer travel? Your checklist may have some holes
Yahoo
17-06-2025
- Business
- Yahoo
Posthaste: What does the TSX's record run say about the economy? Maybe not as much as you'd hope
Canada's stock market has been on a tear lately. Since just before the United States election in November, the S&P/TSX composite index has outperformed both the S&P 500 and the EAFE (Europe, Australasia, and the Far East), according to BMO Capital Markets, and hit a record high this month. So is this a good omen for the Canadian economy? BMO senior economist Robert Kavcic looked at the reasons behind the rally in a recent note entitled 'Is the TSX Glitter Economic Gold?' Investors don't like uncertainty and the turmoil thrown up by U.S. President Donald Trump's trade war has been huge. The first thing to remember, though, is markets are always looking at least three to six months ahead. Kavcic said the worst-case scenario for tariffs was arguably priced in months ago and since then Canada's exemptions under the Canada-United-States-Mexico Agreement and a relative pass on Liberation Day has signalled that the tariff bark could be worse than its bite. The direct hit of tariffs on the country has been narrow, he said. Steel and aluminium producers face hefty 50 per cent duties, and some auto parts have been penalized, but these industries represent only about 1 per cent of the TSX index. Before the trade war broke out, the TSX's forward earnings multiple was around 15x, compared with above 22x for the S&P 500, 'a wide gap from a historical perspective,' said Kavcic. Canada's central bank cut earlier and deeper than most other advanced economies, leaving its policy rate at a much more neutral level than the Federal Reserve's. 'The 225 bps of easing in the past year could be taking the brakes off the economy (with a six-to-12-month lag) just when it needs some help, and the TSX could be reflecting that,' he said. Over the past 25 years, the correlation between TSX performance and economic growth has been positive, but not as strong as in the United States, where the S&P 500 proves a better bellwether, said Kavcic. This comes down to composition. The TSX is dominated by financials and energy/materials. While the former picks up on economic conditions, the latter has less sway in the economy than it used to, he said. Case in point are gold stocks which were five of the top 10 contributors to the TSX's increase this year, and account for about a third of the gain year to date. The big guns of the economy, industrials, consumer spending and real estate represent only 12 per cent, 7 per cent and 2 per cent of the index, respectively. 'The TSX is notoriously not a perfect reflection of the underlying Canadian economy given its composition,' said Kavcic. While the resilience of the Canada's equity market in this tumultuous time is impressive, Kavcic said BMO would be cautious in passing that strength into the economic outlook. However, 'if the market is indeed discounting a manageable outcome — we'll take it.' to get Posthaste delivered straight to your appears to be slipping back into Canada's housing market as data Monday showed home sales rose in May from the month before for the first time in more than six months. 'While one good month of home sales doesn't make a trend, there may be signs of cautious optimism for the resale market for those buyers who remain little affected by the ongoing trade war,' said Kari Norman, an economist with Desjardins Group. 'The combination of lower prices, more inventory and less economic uncertainty may continue to entice more homebuyers back into the market this summer.' New listings increased by over 3 per cent, but the number of months of inventory edged back for the first time in six months from 5.0 in April to 4.9 in May. G7 summit in Kananaskis, Alta. continues Today's Data: Canada international securities transactions, United States retail sales, industrial production and NAHB Housing Market Index Trump said he still favours tariffs against Canada as negotiators sit down at G7 The bond market's long slump: What it means for investors Canada's home sales rise for the first time in more than six months The U.S. bond market is in uncharted territory. The drawdown over 58 consecutive months is by far the longest such stretch in recorded history during which the market has endured a peak-to-trough decline of -17.2 per cent, a staggering figure for an asset class traditionally viewed as a safe haven, writes investing pro Martin Pelletier. It's a stark reminder for investors that even the most stable-seeming assets are not immune to structural shifts. The message is clear: The old rules may no longer apply, and adaptation is not optional, it's essential. Read on for strategies Last week, we published a feature on the death of the summer job as student unemployment reaches crisis levels. We want to hear directly from Canadians aged 15-24 about their summer job search. Send us your story, in 50-100 words, and we'll publish the best submissions in an upcoming edition of the Financial Post. You can submit your story by email to fp_economy@ under the subject heading 'Summer job stories.' Please include your name, your age, the city and province where you reside, and a phone number to reach you. Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@ with your contact info and the gist of your problem and we'll find some experts to help you out while writing a Family Finance story about it (we'll keep your name out of it, of course). Want to learn more about mortgages? Mortgage strategist Robert McLister's Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won't want to miss. Plus check his mortgage rate page for Canada's lowest national mortgage rates, updated daily. Visit the Financial Post's YouTube channel for interviews with Canada's leading experts in business, economics, housing, the energy sector and more. Today's Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg. Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@ Canadians looking for more interest rate relief might be out of luck Toronto condo sales drop 75%, leaving investors bleeding cash, CMHC says Sign in to access your portfolio
Calgary Herald
08-05-2025
- Business
- Calgary Herald
Mortgage rates at 3% or lower the magic number to reignite Canada's housing market
Article content Mortgage rates need to drop to three per cent to get Canada's housing market and homebuyers fired up again, say some industry watchers. Article content The lowest rate for a five-year fixed-rate mortgage, preferred by many Canadian buyers and homeowners, is currently 3.74 per cent, according to an aggregating site operated by Financial Post columnist Robert McLister. Article content Article content Nearly 40 per cent said rates needed to fall to three per cent or lower before they would purchase or refinance a home. Article content 'Three per cent mortgage rates is a level that would actually make sense … from an affordability perspective, even from an investment perspective, but at four per cent borrowing costs, things are still very stretched and don't make a whole lot of sense for a lot of people,' Kavcic said. Article content Andy Hill, a mortgage broker and the cofounder of a mortgage aggregator site, said that a mortgage rate at three per cent or lower is the magic number for some people. Article content Article content 'The real estate market will ignite, we will start to see a lot more transactions, when we have three per cent,' he said. 'We're slowly getting there, but the volatility recently (of tariffs) has added uncertainty to the mix.' Article content Article content Hill said past expectations and the feeling of homebuyers that they want to live more frugally have caused them to react negatively to rates of four per cent and up. Article content For example, 67 per cent of Canadians said the most they were comfortable paying for housing was $1,749 each month, according to a survey by at the end of last year. Furthermore, 42 per cent of respondents who earned at least $100,000 a year said they couldn't afford mortgage payments that were higher than the average amount.
