Thank you for all those who attended Our Outlook 2021 Special Round table event on January 19th. There were more questions asked than were able to address live. Paul Ashworth, Chief North America Economist for Capital Economics and one of our panelists has shared his answers to some of those questions here in text form.
If you would like to view the recording of the Round Table you can access it here
Question 1:
As a former bank macroeconomist, I never expected to be asking this question. But what is your evaluation of political risk in the U.S. with the rise of well-armed right-w.ing militias who feel that insurrection is patriotic. Similar concerns in Europe
Paul Ashworth: I think those risk are relatively low. They are still a small minority and I suspect the backlash against the Capitol riots will mean they lose support from those on the fringe. Within Europe, the right has never really made the long-heralded breakthough in any major country. France is a great example, Le Pen can always garner 20% in the first round of the presidential election, but then barely gets more than 20% in the second round head-to-head match up
Question 2:
When consumers gain confidence about a safe shopping and leisure environment will we see something akin to a post-WWll shopping spree?
Paul Ashworth: Both in the US and Canada, the household saving rate is currently very elevated, which does give scope for a big surge in consumption.
Question 3:
Based on your research Paul, what is your expected inflation rate for 2021?
Paul Ashworth: In both the US and Canada, inflation rates will appear to surge this spring, but that is because of the year-on-year comparison with what happened to prices (they temporarily collpased) in the early stage of the pandemic). inflation will be 3% or higher – but in the second half of this year it should drop back to nearer 2%
Question 4:
Given the massive spending and increase in money supply what might help us avoid the double digit inflation we saw in the 70’s – or worse?
Paul Ashworth: Policymakers still have some control here – they can pull back the stimulus. The question is whether they still have the inflation-fighting fortitude to do so?
Question 5:
How long out do you expect interest rates to remain low?
Paul Ashworth: I don’t think the US Federal Reserve will raise interest rates until 2024. Bank of Canada probably 2023.
–
The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decision. Statements made therein by independent partners represent their professional opinion, do not necessarily reflect the views Portfolio Stewards, and should not be relied upon for any other purpose. Portfolio Stewards does not undertake any obligation to update the information provided herein. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Portfolio Stewards is a portfolio manager registered in Ontario, Alberta, British Columbia and Quebec. This information is current to January 19, 2020 or as of most recently available.
