Canadian investors eye utilities, real estate stocks as BoC cuts rates

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Prospect of increased loan demand could help bank shares

Canadian utility and real estate stocks are likely to be among the biggest beneficiaries of the Bank of Canada’s move to begin cutting interest rates, while the prospect of increased loan demand could help bank shares, investors say.

“They’ve started cutting rates, there’s more to come,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management. “The two big sector plays on that are REITs and utilities ... they’re both income plays and they also have a lot of debt.” Canada’s economy is particularly sensitive to the level of borrowing costs. The mortgage cycle is shorter than in the United States, while household debt as a share of disposable income, at 174%, is much higher than the U.S. share of about 100%, OECD data shows.

 

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