BoC Hikes, Fed Holds, Canadian Mortgage Stress Builds & Google Slumps

In this episode of The Canadian Macro Investor, Simon and Dan break down the Bank of Canada’s latest rate hike and the major shift in its inflation outlook. The Bank now expects inflation to remain elevated for longer, has pushed its return to the 2% target out to 2028, and is openly acknowledging that higher rates could put additional pressure on already-weak housing markets in Toronto and Vancouver.

They then dig into new CMHC data showing growing stress beneath Canada’s mortgage market. Delinquencies among mortgage investment entities have climbed above 11% in the Greater Toronto and Hamilton Area, while more borrowers are seeing their credit deteriorate and mortgage losses continue to build. They also look at Allied Properties REIT after another massive distribution cut sent the stock plunging roughly 30%, and discuss whether the struggling office REIT ultimately needs to be acquired.

Finally, they turn to the AI trade after Google suffered a double-digit post-earnings selloff. Search growth is slowing, AI queries are proving harder to monetize, depreciation is surging and Google expects another significant increase in AI capital expenditures next year. Simon and Dan discuss why the strongest hyperscalers may survive the AI spending boom while heavily leveraged NeoClouds face a much more difficult path as financing dries up.

They wrap up with what companies such as Coca-Cola, Pepsi, Walmart and McDonald’s are telling investors about the increasingly stretched consumer—and why more households are choosing value and eating at home as higher prices and borrowing costs continue to bite.

Stocks discussed: GOOGL, META, MSFT, CRWV, ORCL, AP.UN.TO, TFI.TO, CP.TO, KO, PEP, WMT, MCD

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