'Take a chill pill': CIBC to Canadian investors

One of Canada’s top economists says investors ought to “take a chill pill” because the country’s economic picture isn’t “as bad as you’re hearing on the streets.

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CIBC World Markets Chief Economist Avery Shenfeld writes that, although growth has slowed in emerging markets like China, Russia and Brazil, and Canadian households are highly indebted, those weaknesses are now outweighed by strengths.

For example, the central Bank of Canada’s biggest trading partner, the U.S. Federal Reserve, hiked interest rates in December, indicating strength there. Shenfeld predicts another U.S. interest rate hike is coming in June.

On top of that, Shenfeld writes that Canada’s federal budget – set for March 22 -- is likely to deliver “a larger fiscal boost than was talked about during the federal campaign.”

“The Liberals had campaigned on $10-billion of stimulus which would roughly translate into a $30-billion deficit, but we’re betting on something larger as the outlook for the economy has dimmed since then.”

Shenfeld added the government has “ample fiscal room to stimulate,” noting our 30 per cent federal debt to GDP ratio is far smaller than it is in the U.K., U.S. and Japan.

The report also notes that the loonie has staged a “decent rebound,” which is “helped by dovish Fed talk and a modest firming in crude oil.”

Canada’s main stock index, the S&P/TSX, has been rallying this week. It was up 100 points on the day, at mid-afternoon. The loonie was also up, approaching 75 cents U.S.



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