Christian Lawrence highlights the advantages for financials as Bank of Canada continues rate cuts
Christian Lawrence, a senior market strategist at Rabobank, shared insights on current market trends during an interview with BNN Bloomberg.
Lawrence noted that the economic environment is marked by slowing growth and lower interest rates, which investors should consider when evaluating sector benefits.
Lawrence highlighted the positive outlook for interest rate-sensitive areas.
“I think the interest rate-sensitive areas are going to continue to benefit from this story. I do think that Bank of Canada continues to cut rates not just this year, but into next year as well. That does mean a steeper yield curve, which is traditionally very good for financials,” he said.
He added that the commodities sector might lag due to slowing global growth.
Lawrence predicted a continued weakening of the Canadian dollar, driven by interest rate differentials with the US.
“We’ve already seen the Bank of Canada cut rates twice (and) the market (is) expecting around two and a half more rate cuts by the end of the year. I tend to think we’ll see two more rate cuts from the Bank of Canada. But of course, the (US Federal Reserve) is yet to move. So, it’s really about these changing interest rate stories between the US and Canada,” Lawrence explained.
The strategist also underscored the significance of earnings reports and global events. The technology sector, particularly in the US market, faces challenges, with major companies like Apple, Meta, Amazon, and Microsoft reporting earnings.
Lawrence pointed out that this week, 170 companies in the S&P 500, representing 39 percent of the market cap, are reporting, which could influence the market tone.
Lawrence noted the impact of systematic trading accounts reacting to key levels, affecting equities, interest rates, and currency markets. He mentioned significant market levels, such as the 5,500 level in the S&P 500 and the NASDAQ's 100-day moving average.
Lawrence observed that the Canadian market is performing well, with rate-sensitive stocks like real estate, utilities, and materials leading. However, he pointed out that energy stocks, particularly oil, have struggled.
He emphasized the importance of understanding the environment of slowing growth and lower interest rates to identify sectors that will benefit.
Looking ahead, Lawrence discussed the potential market impact of the US election, noting the influence of interest rate differentials and the market's expectations.
He also mentioned Bitcoin's mainstream appeal, driven by recent endorsements from notable figures, including Donald Trump and Robert Kennedy, as well as the increasing interest from senators.
