Global economy, protectionism and financial markets

The U.S. economy has posted strong growth since the beginning of the year, stimulated by tax reform. The rise of protectionism could, however, threaten the longevity of the business cycle. Interest rate normalization continues in North America while quantitative easing in the euro zone should end as early as 2018. Flattening of the yield curve should continue.

The Bank of Canada should remain cautious while it waits for the conclusion of the NAFTA renegotiations. This uncertainty pushes us to downgrade our target on the dollar. With central banks becoming less accommodating and the spectre of a trade dispute, we expect stock markets to be more volatile in 2018. The U.S. stock market shows more potential but is not safe from a trade dispute with the U.S. China. On a risk-return basis, Canadian and overseas markets are more attractive.