Weak GDP result is just the beginning for Canadian economy, says Citi economist

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Citi economist Veronica Clark believes that weaker-than-expected GDP growth results are only the beginning for the domestic economy,

“GDP by industry fell 0.2 per cent month-over-month in February, weaker than consensus expectations at flat on the month and our forecast for a 0.1% decline. Both goods and services sectors contracted. There is not clear evidence that tariffs and trade uncertainty are already directly weighing on activity in February, as we would expect to see weakness concentrated first in sectors like manufacturing and transportation. But uncertainty could be weighing on activity as real estate sector output declined with falling home sales and various discretionary services sectors were soft. We expect further slowing in coming months with a decline in GDP in Q2.”

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Richard Bernstein, founder of RB Advisors, is shocked by the risk in investors’ portfolios,

“Perhaps the best example of portfolios being steered off-course is the beta of private client portfolios. At the end of January, private client investors’ largest stock holdings had an aggregate beta of an absolutely mind-boggling 1.7 (1.0 implies risk equal to the overall equity market’s risk within the context of a well-diversified portfolio)... that beta decreased as market volatility picked up, but investors nonetheless have started to increase portfolio beta again. Such fervor has historically been a sign that future returns might be subpar. For example, it took NASDAQ more than a decade simply to break even after the peak of the Technology Bubble in March 2000 despite widespread adoption of the internet ”

“Diversification vs. the Siren’s Song” - RB Advisors

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Morgan Stanley head of global research Katy Huberty highlights tariff-related analysis by the firm’s economists,

“Our Global Economists leveraged their proprietary input-output model to estimate which countries and sectors have the greatest value-add economic exposure to tariffs at multiple levels: (1) Primary impacts account for the decline in value-add growth from lower demand; (2) Secondary impacts reflect the ripple effects of lower initial demand on intermediate inputs; and (3) Tertiary effects seek to capture employment loss and operating profit reduction. All told, their model suggests Mexico’s gross value added appears most at risk, followed by China, Korea, and the US. Note: Estimated exposures assume a 10% baseline / 60% tariff on China, and price / volume elasticity of 1 (i.e., a 1% price shift shrinks demand by 1%)”

Canada ranks just behind the U.S. (-0.7 per cent of gross value add versus- 0.9 for the U.S.) which indicates that new tariffs affect the U.S. economy more negatively than ours.

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Bluesky post of the day:

Diversion: “RFK Jr. Goes Full Tinfoil, Pledges to Stop Chemtrails in Latest Dr. Phil Interview” - Gizmodo