The coin toss

Oil costs more this morning after the latest game of whack-a-tanker. The US dollar surged when the Fed raised its interest rate on Wednesday. So the loonie is lower – back down to 71 cents. Trump hates us even more after the EU thing yesterday. It’s even being suggested Mark Carney may get the one thing the rogue American president covets the most. A Pulitzer.

Well, if you’ve been trying to buy a house, or sell one, you probably don’t much care about the macro stuff.

But you should be aware things have flipped in the last week or so. That Fed move was a big deal. Inflation in the States next month will be even more alarming. More increases are coming. With each one the FX market will tank our currency a little more, due to the big gap between US and Canadian interest rates.

Everyone is now understanding crude oil prices will be higher for a lot longer. Iran wants more conflict leading up to the midterm elections in November. That key Saudi pipeline is trashed while the Houthis have choked off the Red Sea strait, matching the Iranians over on the Gulf. It all means a growing global energy crisis which is shrinking Middle East GDPs, causing riots in SE Asia and Africa and now threatens to crash crops in places where people are already starving. Thanks, Trump. Oh, and the US is also trying to create a disaster in Cuba by denying it fuel and humanitarian supplies.

Anyway, it’s a mess. More to come.

So markets have just turned hawkish for interest rates in Canada. A couple of weeks ago the betting was 90% that our CB would keep its key rate low, at 2.25%. No more. It’s basically a 50-50 coin flip now that our guys will follow the Fed and up the cost of money next month.

Overnight market swaps (OIS) and the bond market have been reacting to the latest surge in oil prices, the mounting inflation pressure, currency fluctuations and worries about US debt and leadership. Doves are becoming hawks, with traders anticipating a new phase of multiple rate increases leading into 2027.

Of course, it’s no slam-dunk. Trump could go harder on Canada, refusing to get back to negotiating a trade deal with Canada, now that we’re all wearing berets and lederhosen. The maple economy could slump, even fall into recession, then rate hikes would just make matters worse. But that’s conjecture. What we know for sure is that this morning oil is well over $100 a can and we’re deep into a hurtful trade war.

“Until we achieve a meaningful truce in the trade war,” says CIBC economist Avery Shenfeld, “the Bank of Canada has reason to defer actual hikes until after the turn of the year when, in our base case outlook, a trade deal might again be achievable.”

But nobody knows.

Meanwhile the housing market continues to fall into a funk. September sales so far in most markets appear to be dismal. Listings have faded and prices have generally stalled out. Sellers were hoping for an autumn bounce that so far has fizzled.

The sum of all realtor fears, of course, is a pop in mortgage rates. These days the US market is being slaughtered as home loan costs creep up to the 7% mark. Canadian borrowers can still get money in the 4% range, but the bond market is signalling higher numbers may be on the way.

The fact is that rates have been rising globally. Japan went to a 33-year high overnight. The European Central Bank hiked. And the Fed. Hundred-dollar oil and a trade war are world-wide issues. Canada is special (of course) but not immune.

So you might as well cancel your listing. Buyers are turtling. Try again later. Like the spring of 2029.

About the picture: “My brother Nick has been an avid reader many years and regularly shares your wisdom on to me ” writes Rich. “Thank YOU for perspective on reality!  These pups are inseparable – pals who love walks in the Laurentian foothills. Stella (Artois) is the little one 1.5 years old a Morkie (Maltese and Yorkie mix), Winston (Churchill ) the white one is  a full Maltese and is 2.5 years old. We all live in Mirabel en Haut Quebec (halfway between Mt Tremblant and Montreal).”

Source: https://www.greaterfool.ca/2026/09/18/the-coin-toss/