Canada’s interest rates at 15-years high

January has been the month of rebound for a lot of North American equities after the economic reports showing the resilience of US and Canadian economy and their inflation easing. S&P 500 and Nasdaq have added 6.02% and 11.04% and Canada’s S&P/TSX had advanced 6.86% so far in January.

Both US and Canada inflation readings were better than expected and showing signs of cooling down alongside decent economic reading. US GDP expanded more than expected by 2.9% in the final quarter of 2022 and Canada’s average weekly earnings rose.

Although, some components of inflation may be sticky, there is not much US central bank can do to control that by raising rates higher.

The speculation from the market is that US central banks may be increase rate by another 0.5% and be done by the tightening cycle. Bank of Canada increase the rates by another 0.25% this week to 4.5% which is the highest rate in 15 years but called and end to the rate hike cycle.

Elsewhere, the fourth quarter earnings reports of the listed companies are a mixed bag that certainly show some lights at the end of the tunnel. The tech layoffs and their interesting valuations have sparked a rally in tech names in recent days and many believe the bear market is now over and 2023 will be year of good fortune for the equity and bond markets.