Recession Unlikely In Near Term

Canada does not face the prospect of a recession in the near term, says an HSBC Asset Management ‘Canada Outlook.’ Fears around inflation and higher interest rates have spiked market volatility, it says, as investors are worried that higher commodity prices and the U.S. Fed’s actions may drive a recession. Concurrently, shocks from COVID-19 and the Russia-Ukraine war are creating structural changes that are bringing more complexities to the table. While investment markets have been battered by these adverse shocks, and there is significant uncertainty about what happens next, on balance, it says Canadian investors are weathering the current volatility better than most, based on four positive factors: a strong job market, high consumer savings levels, solid corporate earnings, and robust commodity prices. As well, the Canadian employment picture is particularly encouraging. There are now more than one million job openings, equivalent to around 0.8 jobs per unemployed person, a level never seen in recent history. However, longer term, it does see the economic landscape shifting over the next decade to one where stubborn inflation, higher interest rates, and extended bouts of volatility define how the Canadian and global economies and financial markets will perform.