October 10, 2024 • 5 mins
We have not YET seen a recession in Canada or the U.S., at least from a “headline” GDP standpoint. But on a per-capita/ex-immigration basis, Canada is already there...and the U.S. may not be far behind. That’s what Dylan Smith, vice president and senior economist at Rosenberg Research, told me for this week’s MoneyShow MoneyMasters Podcast segment, recorded on-site at our recent Toronto conference.
In Dylan’s view, stimulus checks from the U.S. government padded consumer spending during and after the pandemic. But the savings Americans accumulated have now been “spent down” – leaving spending from high-end consumers as one of the only supports left for the economy. Meanwhile, “distortions” and “false assumptions” about the strength of the labor market are concerning...and investors “don’t appreciate how much slack is opening up for the economy.” In Dylan’s take, central banks in both the U.S. and Canada will continue to cut interest rates well into next year to combat emerging weakness. But it may come too late for North America’s twin economic powerhouses.
We then pivot to a discussion of what investors should do in response. Dylan reveals the one asset class he is a “perma-bull” on…which foreign markets look more attractive due to their undervaluation and secular growth outlook...and what to do if you’ve reaped big gains on tech stocks in a strong year for the Nasdaq. For more on-site insights from experts like Dylan, join us for the 2024 MoneyShow Orlando, scheduled for Oct. 17-19 at the Omni Orlando Resort at ChampionsGate. Click here to register: https://orlandomoneyshow.com/?scode=061246
In Dylan’s view, stimulus checks from the U.S. government padded consumer spending during and after the pandemic. But the savings Americans accumulated have now been “spent down” – leaving spending from high-end consumers as one of the only supports left for the economy. Meanwhile, “distortions” and “false assumptions” about the strength of the labor market are concerning...and investors “don’t appreciate how much slack is opening up for the economy.” In Dylan’s take, central banks in both the U.S. and Canada will continue to cut interest rates well into next year to combat emerging weakness. But it may come too late for North America’s twin economic powerhouses.
We then pivot to a discussion of what investors should do in response. Dylan reveals the one asset class he is a “perma-bull” on…which foreign markets look more attractive due to their undervaluation and secular growth outlook...and what to do if you’ve reaped big gains on tech stocks in a strong year for the Nasdaq. For more on-site insights from experts like Dylan, join us for the 2024 MoneyShow Orlando, scheduled for Oct. 17-19 at the Omni Orlando Resort at ChampionsGate. Click here to register: https://orlandomoneyshow.com/?scode=061246
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Either. I'm Mike Larson, editor in chief with Money Show,
and I'm here at the Toronto Money Show with Dylan
Smith of Rosenberg Research. Dylan, how are you.
Speaker 2 (00:11):
I'm great, Thanks Mike.
Speaker 1 (00:12):
I appreciate you taking some time out to talk. I
know it's very busy these days. You're here at the More.
Your presentation here at the Money Show was a little
bit more conservative than some of the others that we've heard,
and that's how I'm gonna put a conservative. What is
it that worries you about this marketing economic environment?
Speaker 2 (00:26):
Well, you can say bearish, I don't mind.
Speaker 1 (00:28):
Okay, Barish, let's go.
Speaker 2 (00:30):
Well what warriors we got? You know, I think there's
a few things that we're concerned about, but the main
one is that we see the labor market cracking up
family rapidly going forward to the US. Two elements of that.
The first is that I don't think we have a
clear picture of where the labor market is right now.
There are lots of distortions in tones of how it's measured,
(00:51):
and we're seeing lots of revisions and way more to
come in out of you. So we think people are
running on false assumptions about where the labor market actually is,
and that's forcing the f a little bit behind the cove.
The other thing that's happening related to the label market,
but also more broadly, is that people won't appreciate how
much slack is opening up for the economy. And we
already have inflation coming down. That's kind of pulling fation
down even more. And so the temptation to to sort
(01:14):
of fight the previous battle and squeeze the last percentage
point on hot tenth per percentage pout of inflation at
the cost of a broader slowdown is becoming a big risk.
So that's that's what's keeping us up to night.
Speaker 1 (01:26):
Okay, are you more concerned about the outlook for the
US or Canada or both for that matter.
Speaker 2 (01:33):
I'm more concerned about the outlook for the US. I'm
more concerned about where Canada actually is right now. I
think Canada is a few months or a year ahead
of whether the US will be the only reason that
it's not there in the macrodata as much is because
of the effects of the immigration surge, which is creating
new demand. It's creating, you know, the sort of very
(01:54):
high demanded in areas that are that are pushing prices
up a little bit in Canada, and we're seeing they
effect in shortages in cases like the rental market and
the housing market, demontfat services like healthcare and education. Even
though we're getting that macro boost, and what it's leading
to is on a per capita basis, because the rest
of the economy is unproductive because productivity is very low,
(02:15):
and because of the big squeeze that high interest rates
have closed in Canada compared to the rest of the
whole compets to the US, Canada is already in the
worst position. That's why we're seeing seeing quite rapidly.
Speaker 1 (02:26):
So Dylan talk a little bit about the FED, the
Bank of Canada. I mean, depending on how things shake out,
are we on this predestined path, or do you think
they can be aggressive enough with policy to make for
a more bolish scenario.
Speaker 2 (02:35):
Overall, we think to the US, the policy that's currently
priced by markets is they're going to do a lot
more than that. And the reason is that they're going
to be pushing on a string for a long time
before they see the rate reduction spike. And we're already
seeing evidence of that in places like the mortgage market,
where in anticipation of cuts. You've seen mortgage rates come
down and you see that have no effect whatsoever on
(02:57):
the problems in the in the housing market in the US. Right,
that's just example of where the first we'll push on
rate rate cuts, there's nothing because you're still tight compared
to what a mutual rate would be. And so that's
why we think. You know, they might not cut fifty
percent to start with if you excided points to start with,
and they might not, you know, go extremely rapidly, but
it's gonna be a steady diet of cuts going forward,
(03:18):
and that's not what the market's quite the price. For Canada,
we think it'll.
Speaker 1 (03:21):
Be more aggressive, got it, Canada more aggress I understated.
Let's briefly touch on politics and sort of fiscal policy,
whether it's the US of Canada or again both. I mean,
how do you see things shaking out there and can
that impact the markets or this sort of economic scenario
looking for I.
Speaker 2 (03:35):
Mean, we have a fairly good sense of the in
the US, of the economic clans of both candidates. A
lot of risk in both of them. We can get
into the details of the specific policy of pronouncements, but
you know, there's a fair all. If setting all the
good is always something bad. It can be both of
the policy and posals, and the net outcome for both
is either a flat or rising dead levels in the US,
which is not what it is right. So without a
(03:58):
big inflation spank again, dead levels will continue to rise,
probably and that's going to create a sort of compounding
effect that's correctly going to become more of a problem
from US economy and put more weight on the private
sector to drive broad and put more cost of all
tax PATA. So that's something are a little bit worried
about there in Canada. We're a little bit frozen until
the next election. I think there's been a bit more
(04:19):
tax to spend than we'd like to see in the
last couple of budgets, but you know, nothing as drastic
as in the US.
Speaker 1 (04:24):
But you know, I guess one other question that's obvious
for an investor. That's hearing what your thoughts are and
how things are going to shake out. What are some
of the ideas, some of the ways in terms of
your portfolio you can position yourself to profit or protect
yourself from that.
Speaker 2 (04:35):
Well, it's all about protection exactly. To just said in
this kind of environment that I'm describing. It's not necessarily
a bad thing, and there's places where we're quite bullish.
In fact, we call that soundscromible. It's on bonds. When
a policy rates go down, bonds appreciate, and we're seeing
a really nice sweet spot in bonds where that case
with capital appreciation is becoming very stronger on high conviction
(04:56):
and you get yield pick up and it's really you'll
pick up because it's higher than inflation at the moment.
So we would use that as a good diversification tools.
Others include gold places like India, Japan where we see
good secular growth stories happening and some some undervalue vision. Then,
so you know, if you've been holding onto the to
the tech story, if you've been holding in video and
(05:17):
then on for the riot, well you've done very well.
It's probably time to divers a fight to insturrage yourself
for some of the down town.
Speaker 1 (05:23):
That's coming up til I think that's a great place
to wrap up. I appreciate you taking some time out
here and enjoy the rest of the show.
Speaker 2 (05:28):
Heys, thanks, thank care.
Speaker 1 (05:29):
We'll have more interviews for you every week, so I
encourage you to subscribe to the Money Master's podcast so
you can stay up to date with the insights from
top money experts. You can follow me on Twitter at
real Mike Larson and follow money Show for more investing
and trading content on Twitter, Instagram, and YouTube at money Show.
Thanks for listening, See you next time.
Either. I'm Mike Larson, editor in chief with Money Show,
and I'm here at the Toronto Money Show with Dylan
Smith of Rosenberg Research. Dylan, how are you.
Speaker 2 (00:11):
I'm great, Thanks Mike.
Speaker 1 (00:12):
I appreciate you taking some time out to talk. I
know it's very busy these days. You're here at the More.
Your presentation here at the Money Show was a little
bit more conservative than some of the others that we've heard,
and that's how I'm gonna put a conservative. What is
it that worries you about this marketing economic environment?
Speaker 2 (00:26):
Well, you can say bearish, I don't mind.
Speaker 1 (00:28):
Okay, Barish, let's go.
Speaker 2 (00:30):
Well what warriors we got? You know, I think there's
a few things that we're concerned about, but the main
one is that we see the labor market cracking up
family rapidly going forward to the US. Two elements of that.
The first is that I don't think we have a
clear picture of where the labor market is right now.
There are lots of distortions in tones of how it's measured,
(00:51):
and we're seeing lots of revisions and way more to
come in out of you. So we think people are
running on false assumptions about where the labor market actually is,
and that's forcing the f a little bit behind the cove.
The other thing that's happening related to the label market,
but also more broadly, is that people won't appreciate how
much slack is opening up for the economy. And we
already have inflation coming down. That's kind of pulling fation
down even more. And so the temptation to to sort
(01:14):
of fight the previous battle and squeeze the last percentage
point on hot tenth per percentage pout of inflation at
the cost of a broader slowdown is becoming a big risk.
So that's that's what's keeping us up to night.
Speaker 1 (01:26):
Okay, are you more concerned about the outlook for the
US or Canada or both for that matter.
Speaker 2 (01:33):
I'm more concerned about the outlook for the US. I'm
more concerned about where Canada actually is right now. I
think Canada is a few months or a year ahead
of whether the US will be the only reason that
it's not there in the macrodata as much is because
of the effects of the immigration surge, which is creating
new demand. It's creating, you know, the sort of very
(01:54):
high demanded in areas that are that are pushing prices
up a little bit in Canada, and we're seeing they
effect in shortages in cases like the rental market and
the housing market, demontfat services like healthcare and education. Even
though we're getting that macro boost, and what it's leading
to is on a per capita basis, because the rest
of the economy is unproductive because productivity is very low,
(02:15):
and because of the big squeeze that high interest rates
have closed in Canada compared to the rest of the
whole compets to the US, Canada is already in the
worst position. That's why we're seeing seeing quite rapidly.
Speaker 1 (02:26):
So Dylan talk a little bit about the FED, the
Bank of Canada. I mean, depending on how things shake out,
are we on this predestined path, or do you think
they can be aggressive enough with policy to make for
a more bolish scenario.
Speaker 2 (02:35):
Overall, we think to the US, the policy that's currently
priced by markets is they're going to do a lot
more than that. And the reason is that they're going
to be pushing on a string for a long time
before they see the rate reduction spike. And we're already
seeing evidence of that in places like the mortgage market,
where in anticipation of cuts. You've seen mortgage rates come
down and you see that have no effect whatsoever on
(02:57):
the problems in the in the housing market in the US. Right,
that's just example of where the first we'll push on
rate rate cuts, there's nothing because you're still tight compared
to what a mutual rate would be. And so that's
why we think. You know, they might not cut fifty
percent to start with if you excided points to start with,
and they might not, you know, go extremely rapidly, but
it's gonna be a steady diet of cuts going forward,
(03:18):
and that's not what the market's quite the price. For Canada,
we think it'll.
Speaker 1 (03:21):
Be more aggressive, got it, Canada more aggress I understated.
Let's briefly touch on politics and sort of fiscal policy,
whether it's the US of Canada or again both. I mean,
how do you see things shaking out there and can
that impact the markets or this sort of economic scenario
looking for I.
Speaker 2 (03:35):
Mean, we have a fairly good sense of the in
the US, of the economic clans of both candidates. A
lot of risk in both of them. We can get
into the details of the specific policy of pronouncements, but
you know, there's a fair all. If setting all the
good is always something bad. It can be both of
the policy and posals, and the net outcome for both
is either a flat or rising dead levels in the US,
which is not what it is right. So without a
(03:58):
big inflation spank again, dead levels will continue to rise,
probably and that's going to create a sort of compounding
effect that's correctly going to become more of a problem
from US economy and put more weight on the private
sector to drive broad and put more cost of all
tax PATA. So that's something are a little bit worried
about there in Canada. We're a little bit frozen until
the next election. I think there's been a bit more
(04:19):
tax to spend than we'd like to see in the
last couple of budgets, but you know, nothing as drastic
as in the US.
Speaker 1 (04:24):
But you know, I guess one other question that's obvious
for an investor. That's hearing what your thoughts are and
how things are going to shake out. What are some
of the ideas, some of the ways in terms of
your portfolio you can position yourself to profit or protect
yourself from that.
Speaker 2 (04:35):
Well, it's all about protection exactly. To just said in
this kind of environment that I'm describing. It's not necessarily
a bad thing, and there's places where we're quite bullish.
In fact, we call that soundscromible. It's on bonds. When
a policy rates go down, bonds appreciate, and we're seeing
a really nice sweet spot in bonds where that case
with capital appreciation is becoming very stronger on high conviction
(04:56):
and you get yield pick up and it's really you'll
pick up because it's higher than inflation at the moment.
So we would use that as a good diversification tools.
Others include gold places like India, Japan where we see
good secular growth stories happening and some some undervalue vision. Then,
so you know, if you've been holding onto the to
the tech story, if you've been holding in video and
(05:17):
then on for the riot, well you've done very well.
It's probably time to divers a fight to insturrage yourself
for some of the down town.
Speaker 1 (05:23):
That's coming up til I think that's a great place
to wrap up. I appreciate you taking some time out
here and enjoy the rest of the show.
Speaker 2 (05:28):
Heys, thanks, thank care.
Speaker 1 (05:29):
We'll have more interviews for you every week, so I
encourage you to subscribe to the Money Master's podcast so
you can stay up to date with the insights from
top money experts. You can follow me on Twitter at
real Mike Larson and follow money Show for more investing
and trading content on Twitter, Instagram, and YouTube at money Show.
Thanks for listening, See you next time.
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