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(January 18, 2008) Contrary to several recent media reports, the U.S. economy is not in a recession, nor is it likely to hit one any time soon, according to the economics team at CIBC World Markets. In fact, the American economy should start to recover from a mild slowdown by the middle of this year.

“It’s evident that the U.S. is not in a recession,” says Avery Shenfeld, the firm’s senior economist. “December payroll gains weren’t pretty, but they had a plus sign, and the more reliably estimated three-month average pace was no weaker than in what proved to be only mid-cycle slowdowns.

Shenfeld also points to factory activity, which is no worse than past mid-cycle slowdowns, and orders have actually been climbing as the weaker U.S. dollar made American goods more affordable overseas.

Growth should flatline in the first quarter of the year, he says, but by spring, the economy should start to warm, as the doomsday scenario in the sub-prime mortgage market will fail to materialize.

“In an election year, both Congress and the White House are moving to cobble together a quick stimulus package to put money into voters’ pockets soon,” he says.

What does that mean for Canadian markets? Not much, according to chief strategist Jeff Rubin, who points out that the U.S. economy now accounts for only about 10% of global growth. Emerging markets’ appetite for resources will continue to play a far greater role on the Canadian economy, and these markets are not showing any sign of letting up.

“Ninety dollar [US] crude prices and $3.20 [US] copper prices seem to be defying American economic gravity,” says Rubin. “Either the U.S. economy is not nearly as weak as financial markets perceive it to be, or the U.S. economy is not nearly as important to the global economy as it once was.”

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RBC fires private small cap pool advisor

(January 18, 2008) RBC Asset Management has announced the termination of the sub-advisor on its RBC Private U.S. Small Cap Equity Pool. Byram Capital Management will remain in its current role until RBC completes its search for a replacement.

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Pension returns “paltry” in 2007: RBC Dexia

(January 18, 2008) The second half of 2007 was pretty rough on Canadian pension plans, limiting overall gains to just 1.5% for the year, according to RBC Dexia Investor Services.

Don McDougall, director, advisory services for RBC Dexia, calls 2007 “tumultuous,” pointing to the rapid rise in the Canadian dollar, soaring energy prices and the tightening global credit market.

“After four consecutive years of double-digit annual returns, some weakening was in the cards,” he said.

Canadian equity portfolios produced a return of 8.5%, which, he says, lagged behind the S&P TSX Composite Index by 1.3%. Canadian bonds earned only 3.4% for the year, despite a solid 2.6% gain in the final quarter, making it the worst year for bonds since 1999.

Meanwhile, the 4.7% gain posted by the MSCI World Index was more than wiped out by currency fluctuations, and the index returned a loss of 7.5% for the year.

Using a $340 billion pension universe, RBC Dexia claims to give the most comprehensive view of Canadian pension plans and money managers.

RBC Dexia’s is the third report on the health of pensions to be released in the past two weeks, coming on the heels of one by Mercer and another by Watson Wyatt. Those reports painted very different pictures of the pension landscape, with Watson Wyatt’s pension universe showing a 105% funding ratio, while Mercer reported that funding ratios fell by 2% in 2007.

(01/18/08)