North American Research
USA
Canada
Economics:Growth has decelerated back down below 2% during the
past year
Employment growth resumed last year but unemployment remais close to 9%
High oil prices have lifted inflation above 3%
Real net exports have risen but rising oil prices have kept the external deficit
around 3% of GDP
The fiscal deficit has narrowed in the past two years but still exceeds 8% of GDP
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Investments: Short-term interest rates may not remain low
for as long as markets are pricing
Bond yields are unsustainably low and are likely to rise
The currency is too low and will rise,
particularly when interest rates rise
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Markets: The USD is well below its historical norms
The Fed
funds rate is priced to remain unchanged till 2014
10 year
bond yields are below 2% which represents a multi-decade low
Equities have generated a return of just above 0% in the past year
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Economics:GDP has rebounded solidly with growth of 4% last year
slowing to 3% in 2011
Employment grew by 2% in the past year and unemployment has declined
Rising energy prices have lifted inflation above the Bank of
Canada's 1%-3% target range
Higher energy prices are assisting exports but the external deficit is
still close to 2% of GDP
The fiscal deficit peaked at 3% of GDP with the deficits lifting
public debt towards 80% of GDP
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Investments: Short-term rates will probably rise in 2012
Bond yields are unsustainably low and will rise with global yields
CAD is high in trade-weighted terms and will fall if the USD rises
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Markets: The CAD is above its historical norms because USD is low
The
overnight rate is priced to remain near 1% next year
10 year
bond yields of 2% are at multi-decade lows
Equities have generated a loss of more than -5% in the past year
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