When reporting a story, I constantly refer back to the essential journalism question: “Why should people care?” Lately, we’ve been inundated with financial headlines, such as:
- “Is a recession coming?”
- “When will the trade war end?”
- “Will the Fed lower rates again?”
Yet, few of these articles discuss what the actual impact will be on our day-to-day lives—and our wallets. Allow me to try to shed some light…
First up, the big market mover— and one of President Trump’s twitter topics – the trade war with China. A new set of tariffs on Chinese goods ranging from electronics to socks took effect on September 1st and there are more to come in mid-December.
Tariffs are like a tax that companies have to pay on specific imported goods. The firms have several options: they can pay the tax and make less money, or, they can pass the tax onto consumers in the form of higher prices. Up until now, consumers have been relatively shielded from the effect of the tariffs, but many retailers say they are planning on increasing their prices. Shoppers in the U.S. will soon feel the pinch. According to J.P. Morgan, the latest round of tariffs could cost families roughly $1000 USD extra per year.
With the US and China as Canada’s top two trading partners, Canada’s economy is also bound to feel the pressure of a prolonged trade war. Chinese goods that come through the United States, such as flat screen TVs, could face higher prices. BMO economist Sal Guatieri predicts that Canada’s GDP could take a 0.4% hit from the trade war and a slower U.S. economy.
And this lower growth is bound to affect the returns of Canadian’s investment accounts.
Owning property is a goal for myself and many others. I can browse real estate apps for hours for my dream apartment but living in Manhattan makes that reality a tad more difficult. However, with 30-year mortgage rates below 4%, qualified buyers may have an easier time as banks look to increase lending. The hope is that lower interest rates will maintain house prices and consumer spending. But there is a catch, I live in New York and state and local tax deductions were recently capped at $10,000 USD, when previously there was no limit, causing many (often wealthier) New Yorkers to flee the state to lower tax states like Florida. With lower interest rates and potentially falling property prices, there might be buying opportunities on the horizon for those looking to invest in U.S. real estate – but not any time soon.
House of Cards
Credit cards (and a decent credit score) are essential for all the purchases we plan to make, big or small. But with recent data breaches I’m worried that my online persona is slowly coming to life on the dark web, and that one day someone else will be buying expensive goods online in my name. I experienced my first credit card data breach when Capital One recently announced that 100 million customers’ accounts and credit card applications were compromised over the past several years. To save future headaches about changing all my passwords after a breach, I plan to use a password manager to come up with nifty, complex passwords in an encrypted database that I will never need to remember. Although these password managers do have chance at being hacked, Washington Post reporter Geoffrey Fowler wrote, “you wouldn’t stop using a seat belt because it couldn’t protect you from every kind of vehicle accident”.
Benjamin Franklin said: “An investment in knowledge pays the best interest.” My priority—and it should be yours too—is to understand the news behind the headlines to ensure that my money is being used in the smartest way.