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Cacic Wealth Management

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Address 500 Centre Street SE 27th Floor Calgary AB, T2G 1A6
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Milan Cacic

September 27, 2024

Money Financial literacy Economy Commentary Weekly update Weekly commentary
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ASSET PRICES KNOW WHAT TO DO

This week, the Peoples Bank of China (PBoC) announced monetary measures to shore up its growth. These measures were as follows:

 

  • Reserve requirement ratio (RRR) cut by 0.5%.
  • Seven day reverse repo rate cut by 0.2%.
  • Guiding banks to lower interest rates on outstanding home mortgages by 0.5%.
  • Payment ratios for second homes lowered from 25% to 15%.

 

 

Meanwhile here in North America, the US began a new easing cycle by starting to cut interest rates. There is no doubt that the monetary policy has shifted to stimulus, the only question is how far it will go. If the central banks around the world all hit us with monetary stimulus, history tells us that asset prices have only one option – to go up! This does not necessarily mean that the stock market will go up, it just means that real tangible assets will likely go up, at least based on history.

 

Combine that with the falling US dollar, and asset prices look even better (Gold has made four new all-time highs in 2024 already). The chart below demonstrates how correlated the US dollar is to the 2-year nominal yield. If the US continues to cut rates, then the US dollar will likely continue to fall and commodities and tangible assets will likely continue to rise.
A chart showing the positive correlation between the value of the USD and 2yr Treasury Yields from Dec 01 2020 to Sep 25, 2024. data retrieved from Reuters ThomsonONE Sep 25, 2024.

I have also included a report from our CIBC Economics team entitled “Revisionist history”.

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan

 

 

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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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