Everything rides on the Bank of Canada! So say most pundits, who are convinced Governor Tiff Macklem and crew must speed up rate cuts to avert a 2025 recession. Phooey! Despite incessant chatter around them, central banks aren’t “central” to the economy or markets. Whether the BoC cuts 25 basis points, 50, or zero, this bull market lives on. Let me show you why.
Hanging on central bankers’ words – like the pundits chirping after Mr. Macklem recently “opened the door” to bigger rate cuts – is doubly daft. Why? Officials frequently issue forecasts and guidance they fail to follow. It isn’t all their fault. The economy is complex. Data vary. Stuff happens. Interpretations change.
Ditto in America, Britain and the euro zone: Wage growth followed inflation rates up … then down. Still, analysts and pundits harp on labour data as if it’s causal. Central bankers globally, blinded by bias, can’t see their error. Consider Wednesday’s U.S. Fed – bigger than expected – 50-bps rate cut. Note the S&P 500 fell slightly that day. Wasn’t that rate cut supposed to be bullish? The fact is that cuts don’t actually help stocks any more than hikes hurt. It is all relatively random.