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‘There’s a lot of stuff to worry about’: Plenty of fear on the horizon at Post’s annual outlook luncheon

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Postmedia CEO Paul Godfrey speaks at the Outlook 2019 luncheon.Mike Hagarty for National Post

A panel of Canadian pundits and financial experts assembled for the National Post and the Canadian Club’s annual outlook luncheon in Toronto on Tuesday to give their forecasts for what the year ahead has in store. For the most part, fear was the order of the day.

Among the concerns the identified on the horizon for 2019 were a no-deal Brexit, unsettled trade wars, a looming recession and, most of all, whatever curveball might come next from United States President Donald Trump.

Here’s a recap of some of the highlights:

Scotiabank’s J.F. Perrault

Trump versus the house equals chaos

J.F. Perrault, Scotiabank

“There’s a lot of stuff to worry about,” said Jean-François Perrault, Scotiabank’s chief economist and senior vice-president. Among his top worries for 2019 was the U.S.-China trade war, though he said it appeared to be nearing a resolution. His other chief worry was “Trump himself.” Trump, now facing off against a Democratic House, is more unpredictable, he said.

“We are clearly going through a period of increased — there’s got to be a polite way of saying it — uh, craziness.”

“Very polite,” said moderator Bruce Sellery.

“We’ve seen this playbook before,” Perrault said. “He’s going to go dirty, he’s going to go low … he’s going to want to change the channel. And that honestly could mean any number of things.”

“Everything is possible with this guy.”

Perrault was more optimistic about Canada’s economic outlook, despite predicting slow growth. “We’re in the late stage of an economic expansion,” he said, projecting around two per cent growth in 2019. “People have a hard time wrapping their heads around that. When growth is slowing, it’s viewed as a bad thing…. It scares people. It makes them think, ‘Oh my God, I’m going to get fired. How am I going to afford my mortgage?’” he said. “This isn’t bad news. This is something that needs to happen.”

Winter is coming

Shauna Sexsmith, Manulife

“I kind of look at this as a Game of Thrones market: Winter is coming,” Shauna Sexsmith, Manulife’s senior managing director, told the luncheon. “A recession is coming at some point. And so we’ve been in the late stages of an economic cycle, the late stages of a bull market. You’ve got all sorts of volatility that happens at the end of an economic cycle and bull market.”

A recession, she said, could arrive as soon as late 2019, or not until 2021.

Postmedia’s Andrew Coyne and Manulife’s Shauna Sexmith

“But that said, bull markets don’t die of old age. It usually takes some other events to get us there,” Sexsmith said. “I’m not trying to be a doom-and-gloomer and say the end of the world is coming. It’s just winter.”

A worst-case Brexit

Andrew Coyne, Postmedia

Andrew Coyne, Postmedia’s national columnist, said a cocktail of issues, including Italy’s recent standoff with the EU, as well as the ongoing Brexit saga, could combine to spook markets and drive “continuing unease about the whole European project and particularly the Euro currency.”

“We’ve got the real prospect staring us in the face of a no-deal Brexit — which is the absolute worst-case scenario, and at this point, you’d have to say that’s probably the most likely scenario,” Coyne said, referring to the possibility of Britain exiting the EU without an agreement in place outlining their relationship going forward.

“Doesn’t mean it’s going to happen, but it means it’s certainly a real threat,” Coyne said.

Asked for his predictions on the fall federal election in Canada, Coyne replied: “Not a clue.”

The federal Liberals, he said, invested deeply in developing Justin Trudeau’s personal image. But they’re tethered to that image even now as polling is showing it’s losing lustre. “The danger, of course, is people fall out of love as quickly as they fall into it,” Coyne said.

Financial Post’s Kevin Carmichael

More growth than we realize

Kevin Carmichael, Financial Post

On Canadian monetary policy, the Financial Post’s national business columnist said he was most interested in the ongoing “output gap.”

“I’m watching the extent to which we’re in something of a productivity boom, like we were in the late ’90s, early 2000s,” he said. “The capacity of the economy to produce non-inflationary growth is growing fast enough that it will allow the central bank to basically leave things on hold.”

“There is more growth happening than we realize.”

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