Here is your Weekly Bottom Line!
• President Obama released his new budget proposals on Monday. The plan calls to cut $1.1 trillion from the deficit over ten years. The budget does not, however, address rising entitlement costs.
• Inflation moved higher in January. Energy prices lifted headline inflation to 1.6%, while the core rate rose to 1.0%. Concerns over disinflation have now faded, but high unemployment and low wage pressures will keep a lid on core price growth in 2011.
• Despite a rise in the stock of foreclosures, mortgage delinquency rates fell in Q4 2010. Rising sales combined with improved mortgage quality should bring the supply of foreclosures down a lot in 2011.
• Improved risk sentiment favoured Canadian stocks this week, as C$-denominated assets continued to attract foreign investors.
• As of mid-Friday, the S&P/TSX composite index stood just 6% shy of its pre-recession peak of 15,000. Even when converted in U.S. dollar terms, its year-over-year gain is the third strongest among the world’s largest indices, after Stockholm and Germany.
• Firm commodity prices and a brighter U.S. economic outlook point to increased optimism over Canada’s near-term economic growth prospects. Nonetheless, soft inflation, a high C$, and an expected moderation in Canadian economic growth beyond the next six months are expected to keep the Bank of Canada on hold until July of this year.