Not dead yet

Dare we say it?

Could things be starting to look vaguely, tentatively, timidly, maybe kinda… better?

It’s possible, which might mark the few days leading to the end-of-summer weekend as the end-of-the-buyer’s-market as well.

Look at the news. On Friday Fed boss Jerome (Big Balls) Powell uttered those eleven worlds that changed everything.

“The shifting balance of risks may warrant adjusting our policy stance.”

That was enough to arouse Mr. Market in a big way. Equities shot higher with the S&P getting its biggest goosing in months. The Nasdaq erupted. Small-cap stocks rallied, as did real estate-related companies and other sectors which jump when the cost of money sags.

What Powell said (in effect) is that it’s time to start lower interest rates in the US (which means they will drop here, too). BMO economist Priscilla Thiagamoorthy figures this means a quarter-point cut on September 17th, another before Christmas and then, “four more in 2026, bringing the policy rate down to just under 3% and within the neutral range.”

Wow. Six chops by the Fed. And in the midst of that process (May) the orange guy will replace BB with a Trumpian toady who might even accelerate the process of rate destruction.

And consider the context. In Canada inflation has dropped again to just 1.7%, meaning there is oodles of room for our central bankers to cut (also on the 17th). Labour markets in Canada and the US are weakening – in fact so much Stateside that the president had a hissy and fired the chief stats person. What a knob thing to do. Anyway, this proves tariffs are starting to bite, jobs are not being created as a result and it’s time for a sprinkle of monetary stimulus.

Speaking of tariffs (more good news) the Carney government just wiped away retaliatory ones on many US goods. For two valid reasons – to grease a new trade deal with Trump and reduce prices for Canadian importers (who pay the tariffs). Traders on the TSX celebrated that news. More record highs.

And then, a budget.

The new finance minister announced that Canada’s first federal budget in well over a year will drop in October. Odds are it will contain a mess of new spending on infrastructure, worker support programs to offset the impact of tariffs, heavy defence and housing expenditures and (sadly) a fat deficit married to a promise of book-balancing to come. Tax increases are doubtful. But don’t fire your accountant.

Mostly the budget will bring a plan, a framework and more fiscal certainty. Markets like that. CEOs and people making hiring decisions also embrace it. The country has been without this context for far too long, living through a time of upheaval – a change in prime ministers, a federal election, the tariff chaos and annexation slurs, mounting economic concerns plus a housing market melt.

So, what now?

Better, that’s what. Low inflation, cheaper interest rates, easing trade tensions, romping financial assets and back-to-normal days in Ottawa. “Although the U.S. and Canadian economies are in slowdown mode,” says economist Thiagamoorthy, “a resumption of rate cuts should help shore up economic activity, keeping recession risks contained.”

Yes, she said it. No recession. Combine that realization with the return of 3% mortgages and the fact house prices are more than 20% cheaper than in 2022, and it’d be no shock to see the current real estate sales slump end by federal budget day.

After all, condo prices have tumbled in many areas. Assignment sellers are desperate to get out. Inventory on both the new and resale markets has exploded in major markets. Realtors are eating bugs. So with cheaper financing, chastened agents and congenial sellers, why wouldn’t buyers materialize? Perhaps it will take only a month or two of slight average price increases and rising sales volumes to signal that no housing collapse is in the cards. It was always going to be a slow melt. And maybe, perchance, the melt is over.

Sorry, kids, doomers and nihilists. Not dead yet.

About the picture: “Another Shuswap summer coming to a close,” writes Scott in BC.  “And yet again the dog is showing us how to live life and enjoy the moment. A cat could never replicate this!”

To be in touch or send a picture of your beast, emailt to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/08/24/not-dead-yet-2/