After two years of a pandemic which left the financial system and the economy confused, 2022 was thought as the year all things returned to normal.
However, as we head into 2023 Canadians are still buried in uncertainty. They’re facing decades-high inflation, stock and housing markets are down and the prospect of a dark cloud which looks a lot like recession. The coming year should be much more pleasant, surely?
Nobody can tell what’s to come on the Canadian economy in 2023 However, having a general concept of what’s in store can help you plan. If you are able to prepare your financial resources for more volatility at the beginning this year then the peace we’re expecting to see will be even more delicious.
- 1. The recession is on the way, but it’s going to be moderate and only last a few days
- 2. The rate of inflation and interest will fall eventually.
- 3. The market’s volatility could give the way to significant growthat the very least, in Canada
- 4. It is expected that the Canadian housing market is expected to stabilize.
- 5. More companies will offer the credit card fee in Canada’s new format.
- 6. Crypto will be a part of the margins of the financial system.
1. The recession is on the way, but it’s going to be moderate and only last a few days
Shannon Terrell:As in the case of the possibility of a Canadian recession is concern, it’s not as much about how, but of the time. After a series of Bank of Canada rate hikes and a mild recession expected next year is anticipated. It is more crucial to know if the 2023 recession forecast will be a disaster for the Canadian economy. The majority of analysts believe that it won’t. Here’s why.
In the present in the moment, the Canadian employment market is booming. The Canadian labour market expanded by 108,000 new positions in October, while unemployment was steady at 5.2 percent. These are great numberspromising numbers. Canada’s employment market is the main driver of our resilience to recession. It’s possible that unemployment will rise to 6.5 per cent in 2023 however we’re well-positioned to survive an economic slowdown that is moderate.
For timing, experts of RBC and Scotiabank believe that Canada is likely to enter recession in 30 days of the beginning of 2023. At midyear, we could expect to see a change within the economic system.
How to deal with the issue:Consider starting (or beefing up) an emergency fund. A little savings in the event of a unemployment or increased costs can bring much-needed security. It is also advisable to examine your credit score particularly, loans with fixed interest rate. When you face economic instability it is similar to throwing a flimsy (and costly) financial hammer into your financial situation. Make sure you pay off high-interest and variable rate debt in order to be prepared for the possibility of economic instability.
2. The rate of inflation and interest will fall eventually.
Clay Jarvis: The Bank of Canada said in its most recent Monetary Policy Report that it anticipates the rate of inflation to decrease to “about 3.3%” by the end of 2023. That could mean lower costs for essentials for the consumer and less interest for those who borrow, especially those who are looking for variable rate mortgages.
I’m not sure that the rates hikes by the Bank of Canada will lower inflation in the same speed. The Bank raised the daily rate by sevenfold between now and 2022 from 0.25 percent to 4.25 percent, but inflation remains high. The rate is down from the July high of 8.1 per cent, however, inflation was still at 6.9 percent in October and has been within the same range since August.
The reason for this is non-economic reasons this time, such as the recent invasion of Ukraine and COVID lockdowns in China It’s reasonable to ask if an purely economic response such as raising interest rates is sufficient to control inflation by the year’s end. I doubt it If inflation starts declining in the first half of 2023, that could provide the Bank an opportunity to stop the rate hikes and think about cutting the overnight rateby a tiny amount — before the end of 2023.
How to deal with this: High interest rates on savings accounts and term deposits will not continue until the end of 2023. So, take advantage whenever you have the chance to. Certificates of investment that guarantee such as these are worth taking a look at in a high-rate market.
3. The market’s volatility could give the way to significant growthat the very least, in Canada
Shannon Terrell: It’s not a secret that 2022 hasn’t been the most profitable years for the investors. To date, all major stock indices across Canada along with the US are in decline. Indeed, many are set to begin 2019 with less than they did at beginning. Markets are volatile, with fluctuating stock prices, which is exacerbated by the soaring inflation rate and the frenzied rate hikes by central banks.
The positive news? The outlook for investors is positive in the coming year,, at the very least Canada. Many experts suggest that US markets will continue to experience a volatility into 2023. But the forecasts regarding Canadian markets are positive. In fact, they are so optimistic some analysts suggest that the Toronto Stock Exchange could reach a record high in 2023 due to rising prices for fuel and other commodities.
Do not think that I’m being naive that we’ll likely have some volatility particularly in the event of a recession. But the most important thing to remember is the fact that Canada’s benchmark index, the S&P/TSX composite is more heavily weighed towards the energy and financial sectors in comparison to those of S&P 500. This gives Canada’s Canadian market an advantage over its American counterpart in 2023.
How to deal with this:No matter how the market moves, there’s nothing to gain from selling in a panic. The majority of investors have a view to stay for the long-term and if you’re a buy-and-hold investor, ensure that you are comfortable with the natural lows and highs that the markets experience. It is possible that some of your investments fall in value and selling them during times when markets are down makes your losses more permanent. The portfolio that is best placed to withstand fluctuations is one that is diversifiable.
4. It is expected that the Canadian housing market is expected to stabilize.
Clay Jarvis:Don’t allow the decline in sales that occurred in the second part of 2022 deceive you that the Canadian real property marketplace will remain right in 2023.
Buyers are likely to deal with exorbitantly excessive interest rates on mortgages in the first quarter or about two-thirds of 2023 however once rates begin ticking down and the buying power of buyers starts rising, I expect you to notice a sudden increase in both prices and sales. The magnitude of these rebounds will depend on the amount buyers can afford to take out.
Following a predicted decline of 20% by 2022 The Canadian Real Estate Association expects sales to decrease by only 2.3 percent by 2023. This isn’t a trend which will reflect in the price of homes and that’s why CREA expects a tiny growth of 0.2 percent for the average price of sales across Canada in the coming year.
The numbers are pretty close to me. The first three months of 2023 are likely to be similar to the one we witnessed in the final quarter of 2022. The sluggish sales are likely to offset any gains that the market will experience towards the close of the year. Keep in mind that Canada is expected to welcome around 465,000 new residents next year. Those that are in a position of buying will increase demand on prices and sales.
What to do: If you’re not in a position to purchase an apartment right today, your situation might not get much better over the next few months. Make use of this time to shore your financial position to pay down certain debts, transfer your savings for down payments into an account with a High-Yield Savings Account or GIC and get your feet wet as the market starts to become more favourable.
5. More companies will offer the credit card fee in Canada’s new format.
Shannon Terrell:In October, Canadian entrepreneurs were given the option of passing on processing charges for credit cards that could be as high as 2.4 percent on their customers. These processing costs pay for the cost of making use of credit card networks, and, as of the present, were borne by merchants. However, here’s the problem: less than 19% small-scale businesses have said they plan to charge the fee, as per an August 2022 survey carried out by the Canadian Federation of Independent Businesses.
This means that more than 80 percent of small companies that were surveyed didn’t have plans to introduce the feeat the very the very least, not right now. What’s the reason? I believe Canadian business owners were cold feet before the rush of Christmas.
The year’s end can be a decisive moment for many companies. Are you at risk of losing customers in a crucial period of profit? Most likely not.
I think we’ll see more acceptance of processing fees as of 2023. We could also see an increase in other payment options which do not incur fees such as ” buy now, pay later” installment loans as well as Interac electronic transfers. One such example is Clik2pay which is a payment service which allows businesses to accept payments in person as well as online through Interac e-Transfer. In the coming year, I’m hoping to be seeing more alternatives to payment methods gain popularity along with the processing costs associated with credit cards.
How to deal with the issue:Business proprietors, do not be scared to look at different methods of processing payments to reach a wider variety of customers. Consumers, be sure to identify processing fees prior to you make a purchase, and then take the time to compare prices. It can also be beneficial to have different types of payment in your wallet including cash.
6. Crypto will be a part of the margins of the financial system.
Clay Jarvis:Rather than playing the role of disruptive force, cryptocurrency disrupted itself in 2022. The losses that hit Bitcoin, Ether, and numerous other tokens accentuated the unpredictability of the industry. The multibillion-dollar crash of the cryptocurrency trading platform FTX in November revealed the mismanagement and corruption at the core to one industry’s once biggest players.
While blockchain is becoming more widely used as well Canadian finance institutions have been testing in their own crypto currencies, the one that many investors are familiar with –an speculative digital asset with the value of…what specifically? -It will be an obscure asset by 2023.
There’s simply not enough regulations in the field of crypto to warrant an immediate, unreserved acceptance from Canada’s strict banking system. Fraud is a problem and so do the sudden, unpredictably highs and lows of prices. These risks are exacerbated due to the fact that crypto assets aren’t eligible to be covered by deposits insurance within Canada. Cryptocurrencies have also been classified as “targets as well as tools” of cybercriminals according to Canadian Centre for Cyber Security. Canadian Centre for Cyber Security.
I’m not sure that these problems will be solved in 2023 however, it could be a significant year for the cryptocurrency sector. The Federal government has recently announced it was working with the stakeholders of digital currencies, which includes cryptocurrencies and cryptocurrencies. This is a signal that cryptocurrency is here to stay when the kinks are ironed out. Such a positive trend is sure to please investors’ ears.
How to deal with this: No matter what digital asset you’re thinking of making an investment in — a cryptocurrency or stock in an exciting blockchain companymaking sure you do your homework is more crucial than ever. Along with examining the investment in itself, be sure you are able to get your money back from wherever you store them or exchange during the case of catastrophic meltdown.
2023 will be more turbulent than 2022