Don't get me wrong, I have a great deal of respect for Stephen Poloz, he is a very smart (and well-educated) individual. However he, like his compatriots to the south, east and west, have been overly optimistic about their expectations for a global economic recovery.
This (the art of economic forecasting) is not science, this is psychology. The central bankers of the world have done what is in their power to do: keep interest rates low, monetary policy "stimulative" and be vocally optimistic.
However, despite their best efforts and intentions, it has not been enough. Equity market participants have bought in, driving prices back to record highs (especially in the US), but businesses are not convinced and have held back investing in productivity advances and the global economy has struggled and earnings are entering their 6th consecutive quarter of annualized negative growth.
Cheap money was intended to let the deleveraging process (paying down debt) work its way through the system, but it has only encouraged greater levels of debt: in Canada, the most highly leveraged and risky households have only added to their debt burden and this frightens both the CMHC and the Bank Of Canada.
Complacency is rampant in the Vancouver and Toronto housing markets: "it has always gone up, so that will continue" is the mantra for those who are paying what we "value" oriented folks consider to be outrageous prices.
Everything economic moves in cycles: it always has and it always will. The timing of those cycles is what is not predictable, but there will always be a peak and a trough and the peak is coming (if it is not already here) and the trough, hopefully shallower than the last one, will follow.
Yellow flags are up and the red one's will soon be flying. Pay heed to the Bank Of Canada's warning signals: they are no longer as optimistic as they once were. That has to stand for something.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist