Lower rates for longer

The Bank of Canada is less likely to pull the trigger on an interest-rate hike this year because of a risk-filled economic environment, TD Economics chief economist Craig Alexander says.

Among the reasons cited for a stand-pat stance are low inflationary expectations, the negative impact on Canada and the U.S. of deepening financial instability in Europe, the high loonie’s impact on exports and uncertainty over the strength of the recovery in the United States.

There is a strong case to be made that an accommodative monetary policy will continue for some time throughout the world, according to Mr. Alexander.

The central bank may well wait until January before moving to raise rates, he says.

Taking a spin on the commodity wheel

The slump in commodity prices shows no signs of letting up any time soon.

Leading economic indicators published by the Organization of Economic Co-operation and Development suggest that a sluggish commodity price profile will stretch into the second half of the year, writes Myles Zyblock, chief institutional strategist and director of capital markets research at RBC Dominion Securities Inc.

Mr. Zyblock points out that industrial metals tend to be more sensitive to economic volatility. While they usually outperform energy and gold in periods of economic expansion, a peak in corporate utilization rates often signals the end of industrial metals’ price leadership, he argues.

“These commodities typically underperform energy and gold as the pace of economic activity slows,” he writes.

“Metals prices and their related equities are most susceptible to the expected growth slowdown. Favour energy and gold over metals in this environment.”

Depressing U.S. housing crash

The housing crash in the United States is proving to be larger and unfolding at a quicker pace than the one that occurred in the Great Depression.

He predicts that prices are likely to fall by another 3 per cent this year, resulting in a 5-per-cent drop over the year as a whole.

That means the bargains just keep getting more attractive.

“The continued fall in mortgage rates has further boosted affordability and valuations have become even more favourable, especially to some overseas buyers,” Mr. Dales wrote in a recent research report.

Valuations are very attractive in Florida, a favoured winter destination for tens of thousands of Canadians. Home prices in that state have slipped even further than the national average.