Canadian housing – Logic behind the madness? [Upbeat music] [CIBC logo] [Canadian housing – Logic behind the madness?] [Benjamin Tal Managing Director and Deputy Chief Economist CIBC Capital Markets] The big question is to what extent the Canadian housing market will continue with this kind of very strong activity? And the first question is why it's happening in the middle of a pandemic? And the answer, of course, is the asymmetrical nature of this recession, with all the jobs lost being low paying, rentals and therefore homebuyers found themselves in a position - and that's very important - that they were able to take advantage of what the recession can give you, namely low interest rates without the cost of a recession, vis-a-vis a broadly based increase in the unemployment rate. That's something that we have never seen before and led to this surge in home buying. [Urban cityscapes] Today, what we are seeing is another factor. Namely, interest rates are starting to rise. People are tweeting about the Bank of Canada moving. Bond yields are starting to move. Therefore, people are sensing that the window is closing and there is this sense of urgency to get into the market and basically, buy this house before it's too late. So, we are borrowing activity from the future. [Aerial shot of a sprawling suburb. A bungalow with a ‘for sale’ sign in front of it. Aerial shot of a sprawling suburb in winter.] And that's exactly why we see activity still accelerating at this stage of the game. That will slow down in the second half of the year as interest rates start rising and the future basically has arrived. [Upbeat music] [The impact of gifting] Now, it doesn't mean that the housing market will derail. The opposite is the case. The fundamentals of the housing market are still very strong, and two things are happening that we have to understand. One is gifting. We have a situation in which one third – one third! – of homebuyers now are getting a significant gift from a family. [Vancouver suburbs and city skyline. Aerial shot of a subdivision.] The average gift is about $80,000. In places like Toronto, Vancouver, it's close to two hundred thousand. And mover-uppers, another 10 percent of people who get a gift, in places like Vancouver, the average gift is three hundred and forty thousand. That's a big gift. This is a major factor impacting the housing market, and if you are interested in understanding the housing market, that's part of it. [Upbeat music] [The impact of immigration] During COVID 2021, last year, we got four hundred and ten thousand new immigrants. That's a huge wave of increase in activity. And next year, we will get more as the quota is rising, which means that this demand will continue to influence the market. [A jet descending onto a landing strip. A timelapse of a jet being filled with passengers. A construction site. A worker making measurements on a construction site.] And we have still very limited supply, with inventories at record low. For the first time, governments at all levels are admitting that supply is the issue because until now we were using demand tools to fight supply issues. For the first time, governments are suggesting that they have to do something about supply. This will take time, but at least it's a step in the right direction. So, at this point, we might see the market still accelerating in the next few months, maybe slow down in the second half of the year as rates start rising, but it will not be derailed. The only thing that can lead to a major adjustment in the market at this point is a monetary policy error in which the central bank, the Bank of Canada, will start raising interest rates way too quickly. That can shock the market. I believe that will not happen, but that's a risk that is facing the housing market at this point. [Upbeat music] [This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change. ™The CIBC logo is a trademark of Canadian Imperial Bank of Commerce (CIBC). The material and/or its contents may not be reproduced without the express written consent of CIBC.] [CIBC logo] [The CIBC logo is a trademark of CIBC, used under license.]

Election outcome - Liberal minority: What's next for investors?

[Soft music plays] Financial Markets tend to react to surprises, and this election result was anything but a surprise.

[Avery Shenfeld, Chief Economist, CIBC World Markets] Score one for the pollsters, they basically had the seat count projections right on.

[Low angle tracking shots of parliament buildings in Ottawa.] And of course, in terms of the parliament, it's out with the old parliament, in with the old parliament, because we really haven't changed the distribution of seats. So, I don't expect a significant market reaction to this. What investors will be focusing on are some of the new agenda items that came out during the election.

[Aerial view of the Parliament of Canada in Ottawa. Low angle tracking shots of Canadian flags.] So, we see in Canada, as in other countries, for example, on climate change…

[Aerial view of solar panels. A wind turbine on a cliff. A man charges an electric car at a dealership.] …some further measures proposed, a more ambitious target, for example, for Canadians to be buying electric vehicles.

[An aerial view of two smokestacks. A time-lapse shot of cars speeding past two smokestacks. A high angle view of traffic at night.] I think in general, people around the world are seeing that the political momentum is towards more efforts on carbon emissions, and therefore some realignments of portfolios designed to both avoid the companies that might be most affected negatively, but also capitalize on the opportunities there. There were some items in terms of raising corporate taxes on some sectors that I think investors will be looking at for their implications.

[Parliament of Canada at night. Parliament of Canada during the day. Low angle tracking shots of Canadian flags.] But remember, all of this was an election result that was well predicted by pollsters, leaves the political landscape in Canada little changed, and therefore, you really have to just look back to the last liberal budget. That's where most of the initiatives are. And that's where most of the things that will affect investors also lie. Good news is that we didn't see in this campaign talk of increasing the tax on capital gains. That's always one that every budget I get asked about. Are we going to see an increase in the capital gains inclusion rate?

[Low angle tracking shot of a parliament building in Ottawa. Aerial view of the Parliament of Canada.] It didn't come up in this campaign. There is a tax on high income earners, a minimum tax of 15 percent that really won't affect that many people. So overall, I would say that investors are probably a bit relieved that at least during the campaign, we didn't see more of an effort to dip into people's pockets.

[Soft music plays]

[Economic outlook] In terms of the economic outlook.

[Low angle view of the parliament clock tower. Aerial view of the Parliament of Canada.] We come out of the election pretty much where we were at the beginning of this campaign, which is that in terms of the biggest risks to the economy, but also the biggest opportunities for the economy, it's all about COVID.

[Birdseye view of an empty parking lot, followed by images of an empty mall and grocery store.] So, in the here and now, we're seeing some disappointments in some economic readings associated with some caution on behalf of consumers in terms of what they're doing out there in the world due to the latest wave of COVID. But it's also still the biggest opportunity. [An plane sits on the tarmac. An empty restaurant.] Most of the gains that we will see in GDP in 2022 and 2023 will lie in the recovery of sectors that have been held back by COVID.

[Vaccine vials in a row. A nurse holds up a vial to camera.] That will benefit as increasing vaccination rates and the fact that more people around the world will be somewhat immune because they've already had COVID.

[A time-lapse shot of cars on a highway. Time-lapse shots of workers in a warehouse.] All of that is going to open the doors to, we think, quite brisk growth globally in 2022, a move to full employment. And while a lot of that is priced into equity markets, you know they're counting on earnings gains associated with the revitalization of the global economy. We still are reasonably comfortable that those gains are in fact coming.

[Soft music plays] [What this means for budget deficits] There isn't much of an impact of the election on budget deficits. They are slated to come down quite dramatically over the next few years, largely because the economy will recover… [Aerial views of the Parliament of Canada.] …and therefore, government revenues will recover. And in addition to that, of course, we'll gradually see the fading out of some of the pandemic relief spending that has helped elevate budget deficits. It turns out that although the liberal platform did include some additional spending as well as part of that paid by tax increases, we also, between the time of the last budget and the election, had an upgraded economic outlook that has lowered the projected budget deficits. So, at the end of the day, we might have had a slightly faster track of deficit reduction that's now offset by the new campaign measures if those indeed go ahead. And you can see that from the bond markets perspective, it doesn't seem that markets are particularly worried about the current level of deficits not only in Canada but around the world.

[Low angle tracking shot of a Canadian flag. Low angle shot of a row of American flags in front of the Washington Monument.] Just judging by how low real interest rates are not only in Canada but in the U.S.

[Soft music plays]

[Market outlook] We don't think that the election itself will cause jitters in the equity market. We certainly didn't see any volatility in equities during the campaign that you could attribute to the election. Nor for that matter did we see it in the bond market or the value of the Canadian dollar. In the very near term, there are reasons for some caution.

[A man wearing a mask walks down a street in slow motion. A woman wearing a mask looks at her phone on a train.] Again, a lot of the optimism that's already reflected in stocks could be challenged a little bit in the near term by the fact that COVID-19 is still out there, might weigh on economic activity and therefore earnings in the upcoming quarter. But for investors with a longerterm perspective, I think we have to look through this, this last perhaps serious wave of COVID towards the better times beyond 2021.

[Soft music plays]

[This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change. ®The CIBC logo is a registered trademark of Canadian Imperial Bank of Commerce (CIBC). The material and/or its contents may not be reproduced without the express written consent of CIBC.] [CIBC Logo] [This logo is a trademark of CIBC, used under license.]

Commodities and C$ - how long will the rally last?

 

[Soft music plays]

 

[Avery Shenfeld, Chief Economist, CIBC World Markets]

 

Make no mistake, the rise that we're seeing in commodity prices––and it's quite broadly based––is good news for the Canadian economy and good news for Canadian investors.

[An aerial view of a natural gas refinery. A wide shot of a mining dump truck driving up a cliffside. An aerial view of a clear-cut forest. Polished logs stacked on each other.] 

 

Of course, a substantial chunk of our equity market is tied up in resources, whether that's energy, or mining, or forest products. And those companies are certainly showing
a big lift in profitability at these higher prices.

[A forklift pushes a log. A person takes rock samples from inside a mine shaft.]

And for the Canadian economy, that does mean more jobs in some of those sectors. But importantly, it also means more money to go around in the economy: among the workers, shareholders, and other participants,

[An aerial view of the Parliament buildings in Ottawa.]

...including governments that levy taxes on companies in these sectors. So, the here and now, this is definitely a gift for the Canadian economy and a gift for Canadian financial markets.

[Soft music plays]

[Short-term commodity rallies]

But historically, it's worth noting that these sorts of commodity rallies rarely last that long.

[A row of red flags flap in the breeze. Pictures of Deng Xiaoping and Jimmy Carter during a press conference on the Whitehouse lawn in 1979. Aerial views of Shenzhen, China.]

There was one so-called commodity super cycle that was associated with China's big industrialization wave, in which that huge economy sucked in so much raw materials that they elevated prices for several years.

[An aerial view of a shipping yard in China.]

But in most of the other cases that we've seen in decades past, commodity prices have rallied for a year or two, and then essentially given back much of what they've gained, as supply starts to catch up. If you actually take commodity prices today, for example, and deflate them by the CPI, so where are they in terms of real prices relative to decades ago?

 

[Aerial views of bulldozers.]

Actually, no higher now than they were in 2001. So, technology improvements in mining, in extraction industries, tend to offset the more increasing scarcity of those resources and keep their prices, in real terms, roughly constant over the decades. So, enjoy it while it lasts in terms of returns in your portfolio, in resource-oriented stocks. But don't count on that lasting forever.

 

[Soft music plays]

 

[How long will the commodity rally continue?]

 

One of the potential negatives of stronger commodity prices for the Canadian economy, is that with them we tend to see an elevated level of the Canadian dollar.

 

[Computer-generated stacks of $100 (CAD) bills. Stacks of U.S. $100 bills.]

 

And while that's something that the commodities exporters can certainly live with, because they're getting higher U.S. dollar prices for their goods, we have to remember that Canada's more than a resource producer.

 

[An aerial view of a Canadian shipping yard. A forklift carries planks of wood.]

 

In fact, only a minority of Canada's exports are raw materials.

 

[Car doors being manufactured. A small plane being manufactured. A pharmaceutical plant making pills.]

 

We have a substantial export basket in everything from automotive equipment, to aircraft, to machinery, to pharmaceuticals.

 

[Computer-generated stacks of $100 (CAD) bills.]

 

And for those companies, a higher Canadian dollar means that you're paying your workers more in U.S. dollar terms. And therefore, it becomes tougher to compete in some of those foreign markets.

 

[Exterior of the old Bank of Canada building.]

 

So, we're actually hopeful that the Bank of Canada sends at least somewhat of a message to financial markets, in terms of providing a bit of resistance to an ever-stronger Canadian dollar.

 

[Computer-generated stacks of $100 (CAD) bills. “Made in Canada” boxes rush along a conveyor belt. A box with a Canadian flag on it is placed on a shelf.]

 

Perhaps reminding investors that the stronger the Canadian dollar gets, the more there's a drag on Canada's export sector, and the more that could delay interest rate hikes from the Bank of Canada. Even if we don't ultimately see that delay in rate hikes, just the expectation of that, should help the Canadian dollar level off at some point here.

 

[2022 outlook]

 

Ultimately, we get into 2022.

 

[An aerial view of an auto plant’s parking lot. A time-lapse shot of a shipping yard at night. Aerial views of shipping docks.]

 

We think that the global economy's production engines will be better in gear, we won't have the same restraints we have on production of many of these raw materials. The same shipping delays we're seeing. And so, in many cases, even though the global economy will actually be stronger in 2022, we might actually see some of these resource prices a bit softer.
And therefore, we're also expecting the Canadian dollar to be a bit softer when we look into 2022, than we might see in the here and now. So, the message for investors is, yes, capitalize on the good days for commodities while they're here this year. But don't tilt too much of your investment basket to those quick wins in resource markets. Maintain a kind of diversified portfolio, that will benefit from a broader economic recovery that we expect to see over the next year and a half.

 

[Soft music plays]

 

[This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change.

 

®The CIBC logo is a registered trademark of Canadian Imperial Bank of Commerce (CIBC).
The material and/or its contents may not be reproduced without the express written consent of CIBC.]

 

[CIBC Logo]

 

[This logo is a trademark of CIBC, used under license.]Commodities and C$ - how long will the rally last?

Fake inflation now, but real inflation coming?

 

[Upbeat music]

[Fake inflation now, but real inflation coming?]

[CIBC logo]

[Avery Shenfeld, Chief Economist, CIBC World Markets]

We're going to see two little waves of inflation. One in the here-and-now that I would consider to be a head fake. So this is showing up a lot in the U.S. data, we expect to see it in Canada as well, where prices look very elevated relative to where they were a year ago for two largely temporary reasons. One is that prices for many things were simply very cheap a year ago when the economy was in the throes of the worst of the initial Covid wave.

[A super highway on the outskirts of an urban area without a single car]

So everything from gasoline to hotel rooms to plane tickets were obviously very cheap in that year-ago period.

[A person filling up their car with gas. An airport runway. An airplane in flight.]

And it makes the yearly change look impressive. But if you compare prices to where they were two years ago at this time, they don't actually look that elevated. There is another thing going on, which is that in trying to restart the engines of the global economy in a hurry, really an unprecedented upswing, we're finding it difficult to get everything moving smoothly. We had production difficulties in everything from computer chips to mining to shipping goods.

[A computer circuit board assembly line. A close-up of a computer chip. A mining truck driving through a mine. A waterside shipping yard.]

And the result is that some of the things we're trying to buy are in short supply and the prices are therefore, not surprisingly, being pushed up. But again, that's a one-time phenomenon.

We're expecting that all of these various disruptions and plant closures that took place when Covid was still around will start to disappear as globally Covid cases come down and it'll be easier to get goods to market and therefore relieve some of that price pressure. So this is a bit of fake inflation.

[Upbeat music sting]

[Real inflation threat]

What I do want to warn you about, though, is that very speed of that recovery that we expect to see over the balance of this year and into 2022 is going to start to bring more of a real inflation threat, which is that by 2022 the U.S. economy first and later in the year, the Canadian economy will be approaching full employment again.

[The New York City skyline. The Toronto skyline. A timelapse of a busy urban highway.]

And we could start to get the usual cyclical pressure on prices in which we have a lot of demand, we're running out of workers, wages start to be bid up, and we start to get some core inflation that looks more persistent so we can start to see some inflation numbers again in the sort of 2.5% range, maybe a bit higher. And that's a sign of real inflation pressure starting to build. The question is, what will the central banks do about that? We're still pretty confident that the Federal Reserve and the Bank of Canada will take that as a warning sign that the economy is, in effect, starting to overheat late next year, will start to raise interest rates the way they have done in past cycles, very gently initially, but continuing into 2023. And essentially, they will moderate the pace of growth to get us back to the sort of 2% inflation world we're looking for. So as a long-term bet, I would still bet on the side of the central banks doing what they've done in recent decades. The thing that they failed to do back in the 70s, which is use the interest rate tool they have to keep inflation under control.

[Upbeat music sting]

[Implications for investors]

Nevertheless, all this does have some implications for investors. In the very near term, there could be a little bit of an inflation scare, which could lift longer-term bond rates, making the bond market a little bit of a risky place. There are certainly equities that have prices that go up with inflation and where you might benefit from expectations of price increases that may not actually happen, but which the market will build in. But I think the longer-term issue that you have to think about is that if we do need interest rate hikes to keep inflation under control, then ultimately we are going to see short-term interest rates moving up, long-term interest rates moving up as that happens. And it will be the time over the next year to start tilting your portfolio in a way that protects you against those interest rate increases. So, again, longer-term bonds might be a bit hazardous because their prices fall as rates rise. Equities that are valued largely as bond market substitutes may not do as well as they have done. And instead, it's really about shifting your portfolio towards the kind of stocks that benefit from the heating up of the economy that we're talking about as the driver of inflation.

[An oceanside resort. An overhead shot of a resort house with a woman swimming lengths in a pool. A woman relaxing in a beach-side hammock. A bartender preparing several icy drinks.]

And that is the kind of companies whose sales will respond as consumer spending, particularly on services, starts to revive as Covid fades away. So I don't think we're going to see, the bottom line is, the kind of longer term inflation problem that we saw in the 1970s, the kind that really did affect economic growth and equity returns. Instead, I think we're going to see as central banks take their tools in hand, keep inflation at bay after a couple of what might look like scary spikes.

And as a result, I don't see inflation as the big risk here for the investment market in the next couple of years. Instead, I think the challenges are still to find the companies that are going to benefit from the revival of the economy. And looking a little harder, actually, for those companies where that's not already fully priced in.

[Upbeat music]

[This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change.

®The CIBC logo is a registered trademark of Canadian Imperial Bank of Commerce (CIBC). The material and/or its contents may not be reproduced without the express written consent of CIBC.]

[CIBC logo]

[The CIBC logo is a registered trademark of CIBC, used under license]

ROARING BACK TO LIFE – PERSPECTIVES: APRIL 2021

[Soft music plays]

[Luc De la Durantaye, Chief Investment Strategist and CIO CIBC Asset Management]

From a global economic perspective, I think the consensus has been coming around to our strong growth outlook.

[Computer generated imagery of stock market data.]

The data is starting to confirm that as well.

[A factory floor with automated equipment running. A man taps a tablet on a factory floor.]

When we look at ISM manufacturing or ISM services in the U.S. at a record high, we see improving manufacturing in Europe as well. Hiring intentions are very strong.

[Computer generated (CG) image of stock market data.]

The labour market data that came out was very strong. And we're ahead in the second quarter, third quarter of this year. We're going to have phenomenal growth numbers.

[Soft music plays]

[Inflation fears]

First of all, let's acknowledge that inflation is a variable that has been historically very difficult to forecast.

[Sheets of Canadian $100 bills being printed. A man draws “Inflation” and “Price” on a pane of glass. Closeups of U.S. $100 bills and other currency.]

We must say that economists have less than an A-plus rating on forecasting inflation. Second is, the last 10, 20 years is probably not a good blueprint to forecast what's ahead of us, because we're facing circumstances that are unprecedented, in the sense that, we've never seen central banks that are all focused towards growth.

[Birdseye view of downtown Toronto. Exterior of European Central Bank building. Exterior of the old Bank of Canada Office in Toronto.]

All keeping interest rates towards zero.

[Aerial view of Parliament in Ottawa.]

And in conjunction with governments, are supporting extremely large fiscal deficits that we haven't seen in a number of decades.

[Exterior of the White House.]

And third is, the incentive from governments is very strong towards having strong growth and inflation. Because of the large debt that they have accumulated. And so, the one way to repay debt and lower the debt to GDP level, is to have strong growth and strong inflation as a way to lower the debt burden.

[An empty playground and an empty bike rack. A ladder swings around on a fire truck.]

Because the other elements to lower the debt burden would be to reduce services, increase taxes, or even worse, default on debt, which is unacceptable from a political perspective.

[Aerial view of Parliament in Ottawa.]

So, inflation, we give the benefit of the doubt, at least over the next 12, 18, 24 months, that policy will be very stimulative, and inflation will rise, which will lead to some investors’ concerns.

[Soft music plays]

[Rising prices, rising wages]

What we do look into of what could rise in terms of prices, we look at, for example, commodity prices have been very strong.

[A thresher drives through a wheat field. Coffee beans running through a woman’s fingers]

In terms of wages, which is the key longer term, there are elements that could point towards eventually a bit higher wages.

[Official Whitehouse phot of Joe Biden.]

We see that the Biden administration wants to raise the minimum wage.

[Time-lapse images of factory assembly lines. Exterior of the Federal Reserve building in Washington.]

The growth in employment has been very strong.

[A worker takes a shopping cart through a garden center. Time-lapse image of a shipping dock.]

All central banks have an interest of running the economy hot and raising the employment to the maximum employment level.

[A homeless man carries a garbage bag and walks under a train bridge. A birdseye view of a yacht. A woman taps a tablet in a garden center.]

Having an objective of reducing inequality in society today. So, wages might be a bit stronger in the next twenty-four months. All of that points towards slightly higher inflation that we may have experienced in the last decade.

[Soft music plays]

[Changing investment environment]

So, what does that mean for investors? There's a number of conclusions that are very important because this is a changing investment environment.

[A man writes in a notebook while looking at monitors showing market data.]

One is if central banks are committed to maintain short-term rates anchored close to zero for a lot longer, and run the economy hot, it means that the good economic news will be reflected in the mid-term to long-term bond yields. So, we're going to have a steeper yield curve. And with that comes a number of related conclusions.

[Toronto skyline at night. The Peace Tower in Ottawa.]

Everything that is duration-based, is going to struggle a little bit more. So, the mid-tolong term maturities and the government bond markets, is going to continue to experience a little bit of a backup.Note, though, that bond yields have already backed up. So, there's less to rise in interest rates than we've already seen. So that's the good news.

[Aerial view of the bridge to downtown Ottawa. A red pen underlines financial data on a sheet of paper. Computer generated image of stock market data.]

That being said, the backup in government bond yields will eventually provide an attractive opportunity, adding that asset class to portfolios and help balance a portfolio over time.

[An airplane lands. An empty hotel hallway. A red pen circles financial data.]

From an equity perspective, cyclicals, value and financials, for example, benefit from a steepening yield curve relative to interest sensitive sectors and growthy sectors going forward. So that changes that investment environment.

[A low angle view of buildings on Wall St.]

The other related element to that is the composition of the U.S. market is more growthy oriented versus non-U.S.

[The CIBC flag in front of the Canadian and Ontario flags in downtown Toronto.]

So, a continued potential outperformance of non-U.S. markets versus the U.S.

[Soft music plays]

[This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this document are as of the date of publication unless otherwise indicated and are subject to change.

®The CIBC logo is a registered trademark of the Canadian Imperial Bank of Commerce (CIBC), used under license. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. Certain information that we have provided to you may constitute “forward-looking” statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or achievements to be materially different than the results, performance or achievements expressed or implied in the forward-looking statements.]

[CIBC Logo]

[The CIBC logo is a registered trademark of CIBC, used under license.]

Why invest in global stocks right now?

[Soft music plays]

[Amber Sinha, Senior Portfolio Manager, CIBC Asset Management]

So, the outlook for the global economy, I would say, is fairly positive. And that is because there is significant pent-up demand across the world for things that we wanted to do, and we could not do, over the last one year. So that, I would say, is a good setup. What makes us increasingly comfortable is also the fact that over the last two or so months, expectations have gone up even higher for how much we are going to bounce back.

[Silhouettes of people moving through a frosted glass walking bridge.]

So, that can only be a good thing.

[Time-lapse high angle of escalators in a shopping mall.]

The only dampener that I would say, is the market has reflected these positive developments as well.

[S&P 500 index data on a monitor.]

So, if you take the S&P 500 as an example, it is roughly 30 percent higher than it was pre pandemic. So, it's certainly a natural question to take a pause, and ask whether there is a disconnect with where stock prices are and where the economy is.

[Time-lapse high angle of an urban downtown at night.]

It only helps that the economy is getting stronger. So that's a good thing.

[Pandemic outcomes across the world]

When we look at pandemic outcomes across the world, there are some regions where the outcomes are not as positive as in some others.

[Time-lapse high angle of a Rio de Janeiro with a CG Brazilian flag overlayed on top. High angle shot of a small city in India with the Indian flag overlayed on top.]

The ones that come to mind would be Brazil and India.

[A man is rushed through a hospital hallway on a gurney. Doctors prepare vials of vaccine for injection.]

But the stresses, I would say, are limited to the health care system and not going on to the broader economy. If that were to happen, I think that is certainly cause for some caution.

[Computer-generated (CG) images of earth with blue lines arcing from country to country around the globe.]

Because of the interconnectedness of this planet, things that go wrong in one part of the world can quickly affect other regions of the world as well. So, fingers crossed, we hope for better pandemic outcomes across the world. And that will just help us sustain a stronger recovery.

[CG images of stock market data overlaid onto a global map.]

As global investors, when we look across the world, there are regions that have done better than others, in terms of where we are with the pandemic.

[Time-lapse high angle images of Tokyo and Osaka, Japan, and Seoul, Korea.]

Asia, especially North Asia, Japan, Korea, these are countries that have done an exceptional job, and are reaping the benefits of that as life goes back to normal.

[The New York Stock Exchange building.]

Stock markets have not captured all of that.

[A CG stock ticker.]

So, I think Asia and even X North America would be regions where we see better outcomes in the stock market, because the stock markets do not yet reflect the positive outcomes with respect to the pandemic.

[Impact of strong C$]

The Canadian dollar has been fairly strong this year. It's been strong, I would say, for the last 12 months.

[The New York Stock Exchange building. The Madrid Stock Exchange building.]

As a result, global stock markets, whether it's the U.S., Europe, Asia have actually become cheaper for us as Canadians.

[A closeup of a loony. A CG piggy bank––decorated with the Canadian flag––inflates.]

As our Canadian dollar has increased in value roughly 20 percent over the last one year.

[An aerial view of a wheat thresher. A plane lands on an airstrip.]

The last six months experience, where value stocks, cyclical stocks have been in a leadership role, quality stocks have lagged. This is an especially good opportunity to pick up global high-quality stocks at discounted valuations because our Canadian dollar is where it is.

[Semiconductor supply and demand]

So, semiconductors are becoming the topic of the day, I would say. The companies that are struggling with being able to source semiconductors are not the usual companies that would first come to mind.

[Women tap on tablets. A closeup of a semiconductor circuit.]

So, it's not the Apples and Samsungs of the world that are facing semi shortages.

[Images of automotive manufacturing facilities.]

The semiconductor shortages are actually being felt the most by automotive companies, by industrial companies.

[A closeup of a circuit board. An aerial view of an auto plant parking lot.]

So, semiconductors, I would say, again, being a good example of a very interconnected world. When the pandemic first hit us, there was a lot of cancelations of orders by car companies, by automotive companies, by industrial companies.

[Images of people using laptops, smart phones, and tablets.]

At the same time, while we were all sitting at home and increasingly spending more time on our computers, there was a demand for PCs. There was a demand for smartphones as a lot of other technology products that were in demand.

[An aerial view of an auto plant parking lot. A car door being manufactured on an assembly line.]

So, the capacity that would be generally dedicated towards automotive, industrials, were actually diverted to meet the demand from PCs, smartphones, tablets, what have you.

[Laptops being manufactured on an assembly line.]

Now, I'm sure we would all agree that although we are not past the pandemic, the outlook looks a lot brighter than it did, let's say a year back. And that's reflected in the demand from consumers for those very products.

[Car doors being manufactured on an assembly line. A closeup of a circuit board being created.]

So, people want to go out and buy cars. And factories want to turn the lights on and start working.

[A woman sits in bed typing on a laptop.]

And what they now find is that the semiconductor needs for these companies are just not being met, because the capacity was diverted towards PCs and things like that. It’s a difficult situation. I would still say the market underestimates how deep this crisis is.

[An investor with a headset looks at monitors. An investor sits at home looking at market data on his laptop. An investor looks at market data on a wall-sized touch screen.]

As long-term investors, I think people see the need and the investments will come. So, as long as we are long-term investors, I'm sure there's going to be good ideas coming out of even the lagging edge of semiconductors: by automotive companies by industrial companies.

[A PC keyboard and mouse. A woman looks at a smart phone. A woman looks at a tablet in an airport].

Whereas in the past, it was mostly on the leading edge from PCs, smartphones, tablets, that people had interest.

[Soft music plays]

[This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this video should consult with his or her advisor. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change.

®The CIBC logo is a registered trademark of Canadian Imperial Bank of Commerce (CIBC), used under license. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. Certain information that we have provided to you may constitute “forward-looking” statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or achievements to be materially different than the results, performance or achievements expressed or implied in the forward-looking statements.]

Reddit GameStop and the Short squeeze: Market Impact

[Soft music plays]

[Craig Jerusalim, Portfolio Manager, Canadian Equities, CIBC Asset Management]

Reddit and message boards in general are nothing new. However, when you have a pandemic

on your hands and masses of bored people sitting at home on their phones, combined with

generationally low interest rates, zero cost fractional share purchases, and stimulus cheques

sitting in bank accounts, we had the perfect scenario for the gamification and exploitation of

targeted loopholes.

[CRT televisions are piled on top of each other. One turns on and images of the Wallstreetbets

reddit page, a GameStop storefront, skyscrapers, a man in casual cloths looking at his phone,

and compute-generated imagery of stock market data.]

Now, don’t be fooled. This isn’t quite the David versus Goliath story that it’s made out to be in

the media. It’s more likely a case of David plus Goliath versus Goliath. As there were likely many

sophisticated hedge funds and professionals on both sides of the short squeeze.

[The prisoner’s dilemma]

Now, the speculative frenzy in GameStop and AMC has already begun to abate, just as we

assumed it would. Because in the end it comes down to fundamentals. But more importantly

than fundamentals it comes down to human nature. This was your classic game of prisoner’s

dilemma.

[Images of men in casual cloths looking at their phones. Images of stock market data.]

If every retail investor that had bought those stocks held onto their long positions and

continued to buy more, then theoretically, they could have continued drive the stocks higher

and send the shorts running for the exits.

[compute-generated imagery of a laptop keyboard with the word, “Exit” on one of the keys.]

But the incentive structure is such that no one wants to be left holding the bag. So, greed and

self-interest dictate the run for the exits.

[Ramifications?]

So, what are the ramifications?

[1. Short sellers will be less vocal in their positions.]

Firstly, short sellers will be a less vocal in their positions so as to not draw attention by retail

mobs.

[2. This is a sign of froth in the market]

Second, this is yet another signpost along with SPACs and Bitcoin of froth in the market,

which has to be monitored, as well as the potential that these actions erode confidence in the

market, which could hurt overall sentiment.

[A close-up of gold coins]

[3. Expect additional regulations to come into effect after the fact]

And finally, three. Do expect additional regulations to come into effect after the fact.

But other than those, and a little bit of excitement, markets will move on to the next big thing

like they always do. And GameStop will become a tiny footnote in history.

[Soft Music plays]

[The views expressed in this video are the personal views of Craig Jerusalim and should not be

taken as the views of CIBC Asset Management Inc. This video is provided for general

informational purposes only and does not constitute financial, investment, tax, legal or

accounting advice nor does it constitute an offer or solicitation to buy or sell any securities

referred to. Individual circumstances and current events are critical to sound investment

planning; anyone wishing to act on this video should consult with his or her advisor. All opinions

and estimates expressed in this video are as of the date of publication unless otherwise

indicated, and are subject to change.

®The CIBC logo is a registered trademark of CIBC, used under license.

The material and/or its contents may not be reproduced without the express written consent of

CIBC Asset Management Inc.

Certain information that we have provided to you may constitute “forward-looking”

statements. These statements involve known and unknown risks, uncertainties and other

factors that may cause the actual results or achievements to be materially different than the

results, performance or achievements expressed or implied in the forward-looking statements.]

HOW FAST WILL CANADA’S ECONOMY RECOVER IN 2021?

[Soft music plays]

[Benjamin Tal, Deputy Chief Economist, CIBC World Markets]

The recessions impact on housing

At this point, if you care about the economy is going, you have to ask yourself three

questions: how bad is the winter going to be? How strong the recovery is going to be in

the second half? And how much scarring are we going to take? Namely, what is the

long-term impact of the double dip recession of COVID?

[Bracing for a bad winter]

Let's start with the first question, how bad? It will be bad. But we are in the midst of a

double dip recession.

[Aerial views of an empty rail yard and an empty residential street.]

The economy is now in the midst of shrinking by about two percent. So clearly, we are

in a recession already. We know that.

[An empty apartment complex in winter. A snow-covered swing set.]

We know that the winter is going to be very long, and the number of cases will rise, and

the vaccine is still not there sufficiently. So, I believe that the first quarter will be very,

very difficult. And I think that the market is already pricing it in. We have seen it in the

bond market already. The good news is that you can find some positives in the negative

in the sense that even this recession could have been much worse.

[A sign that says, “SORRY WE ARE CLOSED DUE TO THE CORONAVIRUS!”, is

plastered on a shop window. An aerial view of refinery on the water.]

We have to realize that we are not shutting down the economy completely the way we

did in March or April.

[A time-lapse shot of a grocery store where a man wearing a mask looks at the camera

and holds on to a shopping cart as people pass him by. A woman sits on the couch

holding a credit card. A closeup of a man holding a credit card and typing onto a laptop.]

Also, we are much more productive at this point because we are used to living in this

kind of situation, and e-commerce is more available for businesses, again, allowing

them to do their work in a more efficient way. So overall, yes, it's going to be negative. It

could have been much worse.

[Strong recovery looming]

The good news is that the recovery will be stronger than currently the market is

anticipating.

[Time-lapse images of the sun rising over cities at dawn.]

I believe that this recovery in the second half of the year, starting in the spring, will be in

the neighbourhood of five, six, seven percent GDP growth, up from negative two. So, it

will be very significant. Why? Because we are ready for this.

[An aerial view of a residential neighbourhood. An aerial view of a mansion. A

computer-generated image of multiple skyscrapers and small homes emblazoned with

the Canadian flag—in between the building are gold dollar signs.]

We have a situation in which individuals, households today in Canada are sitting on noless than one hundred billion dollars of extra money, excess cash, excess saving,

looking for direction. There is so much pent up demand in the system. There is money,

income actually went up dramatically, while spending went down.

[A Canadian flag flaps in the breeze in downtown Toronto. A closeup of a green light

flashing.]

Most of this money is held by wealthy individuals and they want to spend and the

minute they have the green light to spend, they will spend that money.

[Images of phones touching debit machines. A young couple shops in a high-end store.

A time-lapse shot of a bustling airport.]

And this money will be spent, where? Not on goods but on services, exactly where you

need the money to go, exactly where we need the jobs to go. Namely, the multiplier

impact of this spending will be very significant.

[A wide shot of baggage being loaded on an airplane. An airport worker fuels-up a

plane. A waiter places a coffee cup on a table.]

Most of it will stay at home and it will go exactly where it should be going, namely the

service sector generating employment where we need to see employment.

[An aerial view of a small city covered in snow. A time-lapse image of a busy market]

So, the short answer, the winter will be tough. The recovery in the second half of the

year will be stronger than expected. We are in a position to take advantage of this kind

of situation.

[A CG image of Canadian money being printed. A card swipes through a debit

machine.]

The money is there. The ability is there. Consumer confidence is there. The income is

there. We just need the green light to spend and this money will be spent in a very

significant way.

[Long-term economic implications]

The third question, the long-term implications, namely the question is to what extent

COVID-19 is an event or a condition? And I believe that in many ways it is an event, in a

sense that after 2008 it took the economy many years to recover with major structural

changes because we lost capacity, we lost employment, and it was very long and tough

process to recover.

[An empty warehouse. A time-lapse image of workers in a manufacturing plant.]

At this time, I think it is very different. We have to remember that this is a very abnormal

situation, in which the vast majority of people are not feeling financially the impact of the

crisis. Most of the jobs lost were in low wage occupations. So, you have a very

asymmetrical damage here, which means that many people will be able to recover very,

very fast.

[A customer grabs a coffee to go at a coffee shop. A new empty restaurant. An aerial

view of a manufacturing plant under construction.]

Also, it's mostly services and it is much easier to start a new restaurant than establish a

new manufacturing facility. So, the recovery would be faster. And for people who are

feeling the pain, the government is there, which is another positive.

[An aerial view of Parliament in Ottawa. A CG image of multiple skyscrapers and small

homes emblazoned with the Canadian flag, in between the building are gold dollar

signs.]

The Canadian government is spending much more than any other country in terms of

support. And that's why the savings rate in Canada is rising and that's why income is

rising. And that will buy us some time until we are ready for the recovery.

So bottom line, the recovery will be stronger than expected. And then we have a

situation, in which, the recovery will be long lasting, and it will not be as bad as we have

seen in 2008. Because the very specific nature of this crisis means that the recovery

would be long lasting.

[Impact for investors]

When it comes to investment, clearly, the near-term is not positive for valuations, but I

believe that the market is already pricing it in.

[An aerial view of Google headquarters in Silicon Valley. A time-lapse shot of an airport.

An aerial view of a city in winter.]

That's one of the reasons why technology is still doing relatively OK, while the victims of

COVID are not doing so well. That will continue to be the case during the winter.

However, I think it's time to start thinking about taking positions in the laggards. In those

industries that are not doing so well now.

[An aerial view of a train. A low angle shot of an airplane landing. An aerial view of a city

in winter. A luxurious hotel lobby. A time-lapse of a shopping mall.]

Because I believe that the minute we turn the corner, especially in the second half of the

year, you will see transportation, aviation, hospitality, restaurants, retail doing better

than expected. So, the laggards will become the winners.

I think we have to start thinking and take opportunities here in terms of valuations,

because now the market is starting to focus only on the near term, while the medium

term would be much, much better. Better than expected.

[Soft music plays]

[This video is provided for general informational purposes only and does not constitute

financial, investment, tax, legal or accounting advice, nor does it constitute an offer or

solicitation to buy or sell any securities referred to. Individual circumstances and current

events are critical to sound investment planning; anyone wishing to act on this video

should consult with his or her advisor. All opinions and estimates expressed in this

video are as of the date of publication unless otherwise indicated, and are subject to

change.

®The CIBC logo is a registered trademark of Canadian Imperial Bank of Commerce

(CIBC), used under license. The material and/or its contents may not be reproduced

without the express written consent of CIBC Asset Management Inc.

Certain information that we have provided to you may constitute “forward-looking”

statements. These statements involve known and unknown risks, uncertainties and

other factors that may cause the actual results or achievements to be materially

different than the results, performance or achievements expressed or implied in the

forward-looking statements.]

Canadian stocks May Outshine in 2021

[Soft music plays]

[Craig Jerusalim, Portfolio Manager, Canadian Equities, CIBC Asset Management]

The S&P 500 has outperformed the TSX nine out of the past 10 years.

[Broad equity indices: U.S. versus Canada

10-year total return annualized

S&P 500 Index (C$) S&P/TSX Index (C$)

Source: Bloomberg, 10-year period as at Jan. 31, 2021]

Since the depths of the financial crisis in 2009, the U.S. benchmark has outpaced the TSX on a total

return basis by well over 300%. But I see the tide turning, and now is not the time to be chasing past

performance.

[A high-angle view of the Alberta tar sands.]

[Valuations]

Let’s start by looking at valuations, which is a moving target, and a messy predictor is the short term, but

can give clues for expected returns over the medium and longer term. Both the S&P 500 and the TSX are

trading well above their long-term averages, and for good reasons:

[The exterior of the old Bank of Canada building in Toronto. A hand clicking pay on cell phone. A woman

holds a credit card and types on a computer.]

Low interest rates, monumental stimulus efforts by governments & central banks, and pent-up demand

from a consumer who is just waiting to get back to normal. But the magnitudes of the divergence is

quite different.

[Canada vs. U.S.

25-year price earnings ratio (P/E)

Source: Bloomberg, 25-period as at Jan. 31, 2021, calculated on a monthly basis]

The S&P 500 is trading at about 10 turns higher than its 25-year average price to earnings ratio. Versus a

premium of about six turns higher for the TSX. Furthermore, the variance between the two indices is

about as wide as it’s been since the latter stages of the tech wreck in 2001.

[Aerial views downtown San Francisco, and Silicon Valley.]

I wouldn’t go as far as claiming the TSX is a ‘value’ play, but there is much more valuation support

relative to the U.S. benchmark.

[Growth prospects]

But you can’t just consider valuation in isolation; one needs to also consider growth prospects.

[Inside the Eaton centre, followed by time-lapse images of shopping centers from around the world.]

Once we get past this COVID chapter, and the world begins to reopen, and commerce once again begins

to ramp up, we will be facing a massive case of global synchronized growth to the likes we haven’t seen

in generations.

[An oil tanker drifting on the water. An aerial view of Google headquarters. A train hauls shipping

container in north Ontario.]

We will likely have all major pistons of the global economy firing at the same time, which has historically

been good for commodities and the cyclically sensitive TSX. Given these prospects, our economics team

projects Canada’s GDP growth to modestly outpace the U.S. over the next 10 years with an average

growth rate a respectably 2.8% compound annual growth rate. Which is likely front loaded due to the

recovery efforts.

[Aerial views of oil and natural gas refineries.]

We also know that this strong global growth is good for the commodities like oil and gas that Canada

produces.

[Environment, Social & Governance (ESG) issues]

Now with the prudent focus on Environment, Social & Governance issues, it is also important to

highlight Canada’s world leading standards when it comes to carbon production and carbon reduction.

[Aerial views of an oil refinery and wind turbines. A man checks a gauge at an oil derrick. A train

transports oil drums.]

While it is important for the world to wean itself off of fossil fuels, it is too disruptive for that to happen

all at once, and it is much better for society, for the barrels needed to be produced, to come from a

country like Canada where environmental precautions and adherence to socially responsibly practices

are followed fervently.

[Population growth]

Another often overlooked case for Canada is population growth.

[Time-lapse shot of downtown Calgary.]

Canada’s aging population doesn’t immediately come to mind when one thinks of population growth,

but once you add immigration, which will surely start to get back to prior peak levels more than

compensates for our birth rate to project Canada to the top of the population growth charts amongst

developed OECD nations.

[Computer generated images of social media symbols. A time-lapse of Parliament hill in Ottawa.]

Just spend 10 minutes on twitter or Fox news, and it’s easy to see why people from all over the world

are clamouring to migrate to a safe, accepting, progressive country like ours with a strong rule of

law. Now many of the people migrating to Canada are on compassionate grounds fleeing persecution

from their homelands, but many more are also choosing to come to Canada as their best opportunity for

their own and their offspring’s future prospects. While the latter groups bring more immediate

economic prosperity, both groups are bringing strong work ethics, higher education, and

entrepreneurial spirits that are translating into many more jobs and much more prosperity for our great

country.

[Mergers and Acquisitions (M&A)]

A final motivation in favour of the TSX, is the M&A super cycle that we are only recently beginning to

see. With generationally low interest rates and lots of money sitting on the sidelines the theme of

corporate consolidation and growth is at its infancy.

[Time-lapse images of Montreal, Parliament hill in Ottawa, and downtown Vancouver and Toronto.]

And it’s not just Canadian resource companies that will benefit, but Canada’s technology sector in hubs

like Montreal, Ottawa, Vancouver and the Toronto Windsor corridor has ballooned beyond the likes of

just Shopify, Constellation and CGI. It’s not just the Canadian companies being targets by larger foreign

entities, but we’re also seeing some of the global champions like the Brookfield Group, Intact Financial

and Couche Tarde establish themselves as global leaders competing on the world stage.

So, putting all this information together, I wouldn’t be advocating for a disproportionate amount of

one’s asset allocation be invested in the TSX, but to the extent that the relative shifting of assets has

been moving south for the past few decades, there is clearly a good case to be made as to why the TSX

could finally begin a period of outperformance relative to its southern counterpart.

[Broad equity indices: U.S. versus Canada

(10-year total return annualized)

S&P 500 Index (C$) S&P/TSX Composite

Source: Bloomberg, 10-year period as at Jan. 31, 2021

Canada vs. U.S

25-year price earnings ratio (P/E)

Source: Bloomberg, 25-period as at Jan. 31, 2021, calculated on a monthly basis]

[Soft music plays]

[The views expressed in this video are the personal views of Craig Jerusalim and should not be taken as

the views of CIBC Asset Management Inc. This video is provided for general informational purposes only

and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an

offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events

are critical to sound investment planning; anyone wishing to act on this video should consult with his or

her advisor. All opinions and estimates expressed in this video are as of the date of publication unless

otherwise indicated, and are subject to change.

®The CIBC logo is a registered trademark of CIBC, used under license.

The material and/or its contents may not be reproduced without the express written consent of CIBC

Asset Management Inc.

Certain information that we have provided to you may constitute “forward-looking” statements. These

statements involve known and unknown risks, uncertainties and other factors that may cause the actual

results or achievements to be materially different than the results, performance or achievements

expressed or implied in the forward-looking statements.]

Will Housing Stay Hot This Recession?

[Soft music plays]

[Benjamin Tal, Deputy Chief Economist, CIBC World Markets]

Clearly this has been the most housing friendly recession ever! The housing market

froze for two months and then took off in a very significant way. In a way that surprised

the market. And if you look at how strong the market is now, it continues to outperform.

The question is why it is happening?

[Why is the housing market so strong?]

And the answer is the abnormality of this recession.

[A computer-generated image of skyscrapers and small homes emblazoned with the

Canadian flag—in between the buildings are gold dollar signs.]

We have to remember that the vast majority of households in Canada did not feel this

recession, financially speaking, but they are in a position to take advantage of extremely

low interest rates. And that's exactly what we are seeing.

[A waitress in a café walks towards the camera holding a coffee cup. A high-rise

apartment complex. In a living room, a real estate agent hands the keys to the house to

family of three.]

So most of the people that lost their jobs, they are in low wage occupations. Many of

them are renters. And we see it in the rental market. But you don't see it in the home

buying market. And that's something that is very, very different than any other recession

in history. I think this will continue.

Clearly in the very near term, the housing market will slow down.

[An aerial shot of the condo buildings on the Toronto waterfront. A hyper-lapse shot

moving swiftly down a sidewalk on the Toronto waterfront.]

We got very strong numbers for December on a year-over-year basis. Activity is rising

by about 50 percent. We have to be careful here, because remember, usually

December is a very weak month for real estate people are away.

[An aerial view of small, half-finished houses in a wintery landscape. An aerial view of

the Fort Lauderdale waterfront in Florida. A closeup of a set of house keys changing

hands across a desk. A model house sits on the desk.]

This time, of course, nobody went anywhere. So people were buying houses much

more than any other year. Don't read too much into it.

[Interest rates]

The overall trajectory is of some softening in activity. And with the economy

experiencing a double dip recession, we are going to see some softening in the housing

market during the winter.

[An aerial shot of the condo buildings on the Toronto waterfront in winter. A time-lapse

panning shot of the Hamilton skyline at night. An aerial shot of the condo buildings on

the Toronto waterfront in summer.]

However, to the extent that there will be some pent up demand being built during the

winter, it will be utilized during the spring and clearly during the summer. Interest rates

will remain low for a long period of time.

[Exterior shots of the old Bank of Canada building. An aerial shot of the Parliament in

Ottawa.]

The Bank of Canada is telling us that they are not touching interest rates until 2023. And

even if we see some increase in the five-year rate, the Bank of Canada will target this

rate. They will be buying bonds to make sure that the five-year rate does not rise

dramatically. So therefore, we see a situation which interest rates will remain very

attractive supporting the housing market.

[Low-rise housing, condos and rental market]

[Aerial shots of low-rise buildings in small remote areas. A hyper-lapse shot moving

down a busy Toronto street at night.]

In addition, we have a situation in which the low-rise segment of the market was doing

much better, and we have seen a significant home price inflation in smaller remote

areas as people were leaving core cities. This was the trend, and it will continue over

the next few months, over the next maybe two quarters.

However, we are already starting to see signs that this trend is slowing. And I believe

that in the second half of the year, into 2022, it will reverse.

[Cars driving on a bridge in winter. An aerial shot of low-rise buildings in a small remote

area.]

So many people have been leaving the cities and moving to low-rise housing in small

remote areas. Prices in those centers have risen dramatically.

[An aerial shot of the condo buildings on the Toronto waterfront in summer. An aerial

shot of low-rise buildings in a small remote area.]

And we are reaching, in my opinion, a resistance level of crisis, because the gap

between core and outside the core is shrinking in a way that people are starting to

question, or rethink the decision to move away from the city.

[An aerial shot of condo buildings in winter. A time-lapse shot of condo buildings in

autumn.]

That's also true for the condo space. And we are starting to see a situation in which,

investors are starting to return to the market.

Rent, as we all know, went down dramatically, reflecting reduced demand. But at the

same time, we see investors starting to take advantage of low interest rates, and falling

rent, to enter the market because they realize that the potential for higher rent down the

road is there. And prices in the condo space have softened. This is a trend that will

continue.

[An aerial shot of low-rise buildings in a small remote area. A shot of a tranquil city

waterfront in Nova Scotia.]

So overall, I would be very careful to suggest that the trend in a rising low-rise segment

of the market will continue at this rate. It will continue, but it will slow down because of a

resistance level. At the same time, I think that the rental market will start stabilizing

because rent went down dramatically and we are seeing a situation in which, investors

are retesting the water.

[Outlook for the next few months]

So, all those forces to me suggest that this activity will soften in the coming few months.

It will be actually a good entry position for next round of price appreciation and strong

demand. But this time, I think that the distribution will be more even, and you will see

the reversal of the trend that we have seen during COVID.

[Soft music plays]

[This video is provided for general informational purposes only and does not constitute

financial, investment, tax, legal or accounting advice, nor does it constitute an offer or

solicitation to buy or sell any securities referred to. Individual circumstances and current

events are critical to sound investment planning; anyone wishing to act on this video

should consult with his or her advisor. All opinions and estimates expressed in this

video are as of the date of publication unless otherwise indicated, and are subject to

change.

®The CIBC logo is a registered trademark of Canadian Imperial Bank of Commerce

(CIBC), used under license. The material and/or its contents may not be reproduced

without the express written consent of CIBC Asset Management Inc.

Certain information that we have provided to you may constitute “forward-looking”

statements. These statements involve known and unknown risks, uncertainties and

other factors that may cause the actual results or achievements to be materially

different than the results, performance or achievements expressed or implied in the

forward-looking statements.]