It’s been a wild two weeks on the markets. Triple digit swings have left investors wondering where to put their money.
It started with the U.S. debt downgrade on August 5th. Now all eyes are on Europe again and for all the wrong reasons. The Euro zone countries are crippled by a continued threat that member nations will default.
Investors have already rejected any idea for the E.U. to further intertwine their nations by issuing Euro bonds. They want a fresh shot of money injected into the economy to get markets moving again. Just like what the U.S did when it raised its debt ceiling at the beginning of the month.
Another case of throwing good money at bad.
So, the world hangs on as the leaders of France and Germany meet to discuss a solution. Investors need just a glimmer of hope that the end of this ongoing debt drama is near.
Believe it or not, Canada is well poised to weather this second economic storm. Some are even calling this latest round of debt worries a bump in the road.
Canada’s Finance Minister Jim Flaherty says the uncertainty may have some adverse effects on our economy, but the country is well positioned to deal with the “global headwinds.”
But Prime Minister Stephen Harper’s not waiting around to find out if that’s true. He’s just returned from a 4-country Latin America trade mission, to find new ways for Canada to do business.
Out with the U.S and in with Brazil, Honduras, Columbia and Costa Rica. The U.S devaluation has sent a flood of money to emerging countries. Investors are desperately looking for alternate places to put their money and diversify their portfolios away from the U.S.
And Canada is no different.
But it’s a tough road, to get trade deals at the same levels that Canada has with the United States.
For example, U.S GDP in 2010 is estimated to be $14.7 trillion. The four Latin American countries Harper visited had a combined GDP of $2.5 trillion last year. Harper has a lot more touring to do if he wants to make up any lost American business.
But one thing Canada has going for it, is its continued strength in real estate. The housing boom continues to move the market along. Despite dooms day predictors that prices are out of control, on average Canadian’s home values continue to rise. Year over year home prices are up 9.3 percent. And that makes people feel good about the economy and comfortable in their spending.
In addition July housing starts climbed to their highest level since April 2010. Something not expected to happen for at least 2 years.
On top of this, economists are now saying interest rates will be held at 1 percent until at least 2012 encouraging more people to get into the housing market.
Here’s the reality check.
Yes, Canada is much better off then the U.S. We have an economy that is growing slow and steady.
But Canadians are still in a record amount of debt. A lot of it is bad consumer debt. And we are still not putting money away for a rainy day, so to speak.
Every Canadian should take inspiration from Harper’s trade tour. We all need to start diversifying our investments, and building savings if we don’t have any.
This, bump in the road, could still make you fall and scrap your knee, and we need to be prepared.