March 2020Benjamin Tal

2020 Vision

The Longest US Expansion Ever 1

Source: BEA, CIBC

0

10

20

30

40

50

60

1 6 11 16 21 26 31 36

1960-69

1969-73

1973-80

1981-90

1990-2001

2001-07

2007-PresentQuarters

current

2

Source: Bloomberg, CIBC

The Yield Curve

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

1988 1993 1998 2003 2008 2013 2018

US 2Yr-3Mo Bond Yield Spread (%-Pts)

Negative Yield Debt – Record High 3

Source: Bloomberg, CIBC

0%

5%

10%

15%

20%

25%

30%

35%

2010 2013 2016 2019

Global Negative Yielding Debt (% of Total)

Interest Rate Cuts Haven’t Worked (L)Eurozone Needs Germany to Take the Brake Off Debt (R) 4

6

7

8

9

10

11

12

-1

0

1

2

3

4

5

Mar

-03

Nov

-05

Jul-

08

Mar

-11

Nov

-13

Jul-

16

Mar

-19

German 10Y Yield (L)German HH Savings Rate (R)

% %

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

2018 2019 2020 2021

CIBC base case - Debt Limitdeficit in 2020, higher in 2021+Germany Allows Debt-BrakeLimit Deficit by 2021Current Policy

EZ Fiscal Stimulus/Drag (%-GDP)

Source: Eurostat, European Commission, IMF, CIBC

Global Trade Recession (L)Bump in Q3 Largely Due to China Front Running Tariffs (R) 5

Source: CBP, CIBC

-4

-2

0

2

4

6

8Q

2 20

17

Q4

2017

Q2

2018

Q4

2018

Q3

2019

(Ju

l/Au

g)

Global Trade Volumes (Q/Q% SAAR)

-4

0

4

8

12

16

Advanced China

Exports, Jul/Aug vs Q2 (% SAAR)

Triple Dipping 6

• Fed Cutting

• Government Spending

• Trump Type Deal with China

No love Lost 7

He Said, Xi Said 8

“We cannot continue to allow China to rape our country, and that’s what they’re doing.”

“Jade can be polished by stones from other hills.”

Signing Trade Agreements 9

US, Mexico, Israel, Chile, Costa Rica, Iceland, Liechtenstein, Norway, Switzerland, Peru, Colombia, Jordan, Panama, Honduras, South Korea, Ukraine, UK, Germany, France, Italy, Sweden, Poland, Romania, Spain, Netherlands, Denmark, Croatia, Bulgaria, Ireland, Greece, Czechia, Belgium, Finland, Hungary, Portugal, Austria, Malta, Luxembourg, Lithuania, Cyprus, Slovenia, Estonia, Latvia, Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, Vietnam.

New Tariffs Will Slow China More Than Desired (L)Beijing Can’t Keep Up Pace of Fiscal Rescue (R) 10

-8

-7

-6

-5

-4

-3

-2

-1

0

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

F

ChinaAdvanced Countries

General Government Cyclically Adjusted Balance (% GDP)

Source: National Statistics Agencies, Bloomberg, CIBC

4.5

5.0

5.5

6.0

6.5

7.0

Current Rate(Q2)

Minus Impactof new and

higher tarriffs

China GDP (% Yr/Yr)

Target Range

Why The US Pushed For A Deal: Consumer Impacts 11

Source: PIIE, CIBC Equity Research

12 of Canada’s Top 15 Export Categories to China At Risk From Phase One Deal 12

0

1

2

3

4

Avg. 2017-19 Canadian Exports to China (Bn of $)*

*Red Bars Indicate Inclusion in Phase One Deal

Source: Statistics Canada, CIBC

Consumption Has Slowed to Levels That Have Previously Been Associated With Rate Cuts 13

Source: Statistics Canada, CIBC

-3

-2

-1

0

1

2

3

4

5

6

2000 2003 2006 2009 2012 2015 2018

Consumption Per Capita (Chg. YoY, %) Rate Cutting Periods

2020 Canadian Fiscal Stimulus in Context 14

Source: IMF, Government Publications, CIBC

0.0

0.5

1.0

1.5

2.0

2.5

China (2015) US (2018) Canada(2017)

EZ (2019) Canada2020F

Maximum Fiscal Stimulus (and Year) as % national GDP

*Historic data based on change in IMF cyclically adjusted general government

Energy Has Driven Export Growth Since the Crisis (L);But Oil Production Growth is Set to Slow (R) 15

Source: Statistics Canada, Canada Energy Regulator, CIBC

90

120

150

180

210

240

27019

97

2000

2003

2006

2009

2012

2015

2018

Real Export Volumes (1997 = 100)

Non-Energy Energy0123456789

10

2017 2018 2019 2020F 2021F

Crude Oil Production Growth (%)

Canada Lost Share When Oil Prices Fell, But Leakage Continues 16

Source: BEA, Census Bureau, CIBC

-3

-2

-1

0

1

2

3

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Canada China Japan Mexico EU

Change in US Import Market Share (%pts)

Canadian Dollar: Not Weak Against Other Competitors 17

Source: BoC, Haver Analytics, CIBC

95

100

105

110

115

120

125

130

135

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

CADUSD (L) CEER ex-US (R)

Stronger CAD

Weaker CAD

Housing Starts Recovered All Lost Ground 18

Source: CMHC, CIBC

170

180

190

200

210

220

230

Jan-

16

Jun-

16

Nov

-16

Apr-

17

Sep-

17

Feb-

18

Jul-

18

Dec-

18

May

-19

Housing Starts(6-mo moving average)

'000 units

-30%-25%-20%-15%-10%-5%0%5%

10%15%20%

SingleDetached

Multiples

Growth (19Q1-19Q3)

Household Credit – Not Exactly Booming 19

Source: Statistics Canada, CIBC

-15

-10

-5

0

5

10

15

1970 1977 1984 1991 1998 2005 2012 2019

Real Household Credit (Y/Y % Chg.)

20

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