«A number of factors are working in Canada's favour, including healthy personal and governmental debt levels, the relatively
modest rise in interest rates in our country, and general affordability in our major cities.
Even
a modest rise in interest rates will send large flows of money to the banking sector.
Not exact matches
Banks may see
modest gains next year, but the insurance sector, which is a big beneficiary of
rising interest rates, could see solid growth for a second year
in a row, he says.
Coupled with expectations of
rising interest rates, this has led to a
modest selloff
in gold.
As usual, I don't place too much emphasis on this sort of forecast, but to the extent that I make any comments at all about the outlook for 2006, the bottom line is this: 1) we can't rule out
modest potential for stock appreciation, which would require the maintenance or expansion of already high price / peak earnings multiples; 2) we also should recognize an uncomfortably large potential for market losses, particularly given that the current bull market has now outlived the median and average bull, yet at higher valuations than most bulls have achieved, a flat yield curve with
rising interest rate pressures, an extended period of internal divergence as measured by breadth and other market action, and complacency at best and excessive bullishness at worst, as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness
in the ISM Purchasing Managers Index
in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weakness.
The bull market has wobbled a bit
in March, as investor unease has
risen in the face of unsettling developments
in Ukraine and concerns about the prospect of higher
interest rates in the U.S. Still, the major market benchmarks managed to show
modest gains for the six - week period end March 25th.
Coupled with expectations of
rising interest rates, this has led to a
modest selloff
in gold.
This means they are extremely sensitive to changes
in interest rates: even a
modest move can cause the value of these funds to
rise or fall by double digits.
The housing recovery appears to have weathered some of the uncertainty, although additional growth is expected to be
modest rather than robust while the market awaits an easing of credit conditions
in the presence of
rising interest rates.