Allan Small, a senior investment advisor of the Allan Small Investment Group with iA Private Wealth, joins Coreena Robertson in the Expert Exchange to analyze the Bank of Canada’s recent decision to cut interest rates by 50 basis points, the fourth cut this year.
In the above video, Small points out that usually you see large cuts during times of crisis, such as COVID.
“We’re far from times of crisis, whether or not we’re in a mild recession here in our country, I think it just depends on who you speak to,” he says.
Small notes that while Canada might be experiencing a mild recession, the overall economic data does not fully support this notion.
Small expresses surprise at the magnitude of the cut, favouring a more gradual approach. He highlights concerns about the Bank of Canada’s strategy and the potential impacts on the housing market as rates drop. He mentions that with current inflation at 1.6 per cent, considerable room remains for further cuts.
“I’m just concerned, we’ve seen such a rapid increase in rates. Now we’re seeing a very rapid decrease in rates, kind of a yo-yo rollercoaster ride.”
Allan Small, senior investment advisor of the Allan Small Investment Group with iA Private Wealth
On the investment front, Small suggests lower interest rates generally boost stock markets, leading to increased business activity and borrowing.
Small advises investors to focus on value across various sectors, including pharmaceuticals, banks and technology. Notable companies he recommends include Pfizer (NYSE:PFE), Bristol-Myers Squibb (NYSE:BMY), Bank of Nova Scotia (TSX:BNS), Bank of Montreal (TSX:BMO) and, despite recent challenges, TD Bank (TSX:TD). He notes that on the company’s recent US$3 billion money-laundering fine, the bank had put aside US$4 billion.
“I think longer term, you’re OK with TD. Shorter term, BMO and Scotia,” Small says.
He also encourages a diversified approach, looking for good valuations in different sectors rather than concentrating heavily on any single one.
You can also check out Small’s previous interview July 24 before the Bank of Canada’s latest rate reduction. He discusses the impact of the inflation rate and the likelihood of continued cuts as the central bank targets a 2 per cent inflation rate.
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