What a volatile market! August saw some insane movements – from a 1000-point Dow Jones Industrial Average (DJIA) drop at market open on Aug 24th, to a stunning recovery a couple of days later. Market volatility has been expected for a while now and with the Fed on the verge of raising interest rates, it provides a great opportunity for long term investors to initiate/add to positions in the midst of the panic. There are equal number of proponents and opponents for interest rate hikes by the Fed. One thing for sure is that even if they do raise the rates, it will be a small token 25 basis points raise and the rates are not going to shoot up anytime soon. The world still stares deflation in the face with a strong US$ and collapse in the commodity markets, coupled with a weak demand from China.
On the Canadian front, after having two 25-basis points rate cuts in Jan and Jul of this year, some economists are already predicting another rate cut to take effect during the September meeting. The interest rates are already at record low at 0.50% and any rate cut will continue fueling the housing market bubble in Canada in an effort to prop up the economy, now that Canada is in a recession.