On Monday the S&P 500 rose 1.1% and Toronto rose 0.6%.
Bank of America rose 4.0%.
Reports tonight say that the U.S. will impose a 20% tariff on Canadian softwood imports. As on result, the Canadian dollar fell to 73.8 U.S. cents.
In terms of the dollar I had already been thinking of moving some U.S. funds back to Canadian dollars and I am now a bit more inclined to do so. But I will move slowly as I certainly can’t be sure that the Canadian dollar will not move lower.
This trade tariff does not bode well for anyone exporting Canadian goods to the U.S.
The tariff could push lumber prices down in Canada and definitely pushes lumber prices up in the U.S.
Statistics Canada reports that on a purchasing power parity basis the Canadian dollar buys in Canada what 84 U.S. cents buys in the U.S. This, in isolation would suggest that the Canadian dollar is too low. It also suggests that Americans, on average, should shop in Canada and that Canadians should, on average, not shop in the U.S. Stay home this summer. Get a free National Park pass.
Statistics Canada also reported that wholesale sales in February were down slightly.
Bank of Montreal is offering Mortgage backed securities involving mortgages not covered by CMHC insurance. I am not interested in investing in this. But it is an interesting development in the mortgage market. I would like to see Canadian banks offer 25 year fixed interest rate mortgages at reasonable rates. They could only do so if a mortgage-backed security market is established. This would involve insured mortgages. Currently there are barriers that prevent banks from offering 25 year fixed rate mortgage backed securities to investors and therefore they can’t offer reasonable rates to borrowers. There is nothing inherently wrong with mortgage-backed securities. The U.S. mortgage crisis was caused by lending to people with insufficient income. This was facilitated by mortgage backed securities but not caused by those securities.