The Bank of Canada's decision to cut its interest rate to 2.5 per cent provides a good chance to review finances and see what opportunities are out there for investing, according to Adam Pukalo, Portfolio Manager with Ventum Financial.
"Farms that I talked to, how does that impact their debt? That's definitely one side of things, depending on each operation's structure," said Pukalo,
"And then also, I look at how it impacts the stock market and the investment side.There are actually sectors and companies that benefit from lower rates and that have actually, I would say, weathered the tariffs quite well. So, there's opportunities out there and I think that's where rates going lower is an okay sign because we don't want to see rates go too low or too high at the same time, because then that's when we want to stay in a certain bandwidth between around this kind of 2% to 3% area."
Depending on the investment portfolio, some sectors and companies have weathered the tariffs better than others and that's something to consider, Pukalo said.
"For example, if a client maybe had more Canadian banks…banks often do well kind of during when rates kind of go lower in some ways, and also they have other sectors or business operations when the rates go higher, they actually make money too, so banks have always been a solid investment depending on if the client's suitability.
"But then, let's say if a client maybe has too much in terms of the U.S., maybe that's where they would have under-performed this year because actually the TSX is one of the best-performing indices this year, year-to-date, compared to the U.S. So, I should say, rates on an investment portfolio really depends on their structure, but there are definitely opportunities out there that I've been taking advantage for clients"
Pukalo recommends talking to a financial advisor first before making any major financial decision.
The Bank of Canada cited tariffs and trade uncertainty weighing down Canada's economy as reasons for the rate going down.
"Canada’s GDP declined by about 1.5 per cent in the second quarter, as expected, with tariffs and trade uncertainty weighing heavily on economic activity." the BoC stated in a news release about its decision, adding exports fell 27 per cent in the second quarter as well as business investment, but consumption and housing activity grew "at a healthy pace."
The Central Bank says it will continue to assess how exports will evolve amid U.S. tariffs and changing trade relationships, and how all that affects business investment, employment, household spending, and inflation.
Pukalo expects one more rate cut this year.
"But the biggest theme, I think, in the words they use is they won't be as forward-looking as normal, and that's one thing to kind of note, is I think that they're trying to maybe hedge their thoughts a little bit, just given the uncertainty that's going on and the volatility. Because there is really less near-term certainty, so they're going to now focus kind of on that bigger picture." he added.
The next interest rate decision is October 29th and its Monetary Policy Report will be released the same day.
