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- They point out that many measures of demand are slowing, and that large imbalances in the housing market make it relatively more vulnerable to the lagged effect of rising interest rates.
- Moreover, they note that cutting interest rates now may not be enough to avoid a recession (given the “Oh Canada Rule” which is based on a modified version of the Sahmi Rule, Adam was out with Great note on this yesterday.
- BCA says options to weather Canada’s recession may include overweight Canadian bonds, perhaps against bonds of other countries that may not cut as much as the Bank of Canada (Australia or US).
- They also take into account long exposure to the Australian dollar versus the Canadian dollar based on more favorable spreads to the Australian dollar.
- Another option is to underweight the TSX compared to the S&P500.
This article was written by Arno V Venter on www.forexlive.com.
