According to a report in the Globe and Mail today, January 20th, Governor Stephen Poloz of the Bank of Canada, is leaving the key interest rate unchanged.
Going beyond the ongoing market slide due to the oil correction, the bank insisted this will be a turnaround year for the economy and are betting that a burst of federal infrastructure coupled with a global recovery will lift the Canadian economy. The size of this stimulus will not be known until the federal budget in March.
In addition, regarding oil prices , the bank of Canada is warning that conditions could still get worse in the oil patch, with more layoffs and production cuts. The good news here, in my opinion, is that the current price of oil is oversold, and that these prices are not sustainable . The Saudi's will at some point capitulate.
"The risks to oil prices are tilted to the upside" the bank said in its monetary policy report. "The significant reductions in oil investment since 2014, could leave further demand increases unmet, putting upward prices and drawing investments back in the sector".
The cheaper dollar is being dragged down by the collapse in oil prices. Once the oil situation has bottomed, I believe that the Canadian dollar will gradually rise, given that the Canadian dollar is heavily pegged to our oil sector. Can't have one without the other.
The key now, is to remain patient. Two important points to remember, is that these times have been proven to be wealth builders via dividend re- investments and new monies. In addition, these times serve to prove, that unlike some, I have not placed all of your investments in the same basket.
Like 2008, we will look back and wish we would have invested even more in 2016. Do not be blinded by bad news. Stay patient and disciplined.
22 January, 2016 Financial Planning