The end of greedflation, Canadian stocks to watch and a 2023 condo boom: Must-read business and investing stories

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Getting caught up on a week that got away? Here’s your weekly digest of The Globe and Mail’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.

New year, better financial outlook?

Sure, interest rates remain high, as does inflation, and we’re teetering on the edge of a recession – but here’s the good news, according to Rob Carrick. The new year is expected to bring an end to hikes in interest rates, which the Bank of Canada raised seven consecutive times in 2022. We may even see them fall in the second half of 2023. Housing prices have also been dropping as of late, and are expected to continue to plummet this year – below $1-million in Toronto and Vancouver, if you can believe it. This will make buying a home more attainable for many Canadians, as it’s possible to buy a house with a down payment of as little as 5 per cent. Finally, could 2023 bring the end to greedflation? After seeing some businesses jamming customers with above-and-beyond price increases last year, we might see those same companies slashing prices to keep customers.

Canada’s labour market continues to add more jobs

Unaffected by mounting headwinds including high interest rates and a possible recession, Canadian employers went on a hiring binge at the end of 2022. The country added 104,000 positions in December, far greater than the 5,000 jobs that financial analysts were expecting, Matt Lundy reports. As such, the unemployment rate dropped to 5 per cent from 5.1 per cent. After a summer lull, when employment fell for three consecutive months from June to August, job creation has come roaring back. This has some analysts concerned that the Bank of Canada is poised to raise rates again in January. Last year, Governor Tiff Macklem had pointed to the need ”to rebalance the labour market,” meaning unemployment would have to rise in order to slow down inflation. While some companies in the tech sector began layoffs last year, this has yet to happen on a wide scale.

The link between wage growth and unemployment

When unemployment is high, wage growth tends to be low, and vice versa, which explains why wages have barely kept up with price inflation since 1975, when real wages typically grew by more than 2 per cent a year. Since then, unemployment has risen thanks to the influx of baby boomers, women entering the workforce and the offshoring of jobs to lower-income countries, writes Frederick Vettese. However, since all of these factors have plateaued, expect Canadian wages to grow faster in real terms for many years to come.

So many condos, so few buyers

At nearly 32,000 condos, a record number of new condominium units are set to hit the Toronto market in 2023, causing many investors to scramble for buyers. As Rachelle Younglai explains, pre-construction condos, which have not yet been built, are mostly bought by investors who plan to rent their units and/or make a profit from a resale. To secure a pre-construction condo, a 20-per-cent down payment is required, and after the condo has been built, the buyer is required to pay the remaining 80 per cent. However, sky-high interest rates have ramped up borrowing costs and led to a drop in real-estate sales and home prices, as many buyers have difficulties qualifying for a mortgage. This has, in turn, made it harder for investors to close on new properties, and led to an uptick in buyers trying to get out of their newly built condos by selling the right to buy their new unit, also known as an assignment sale.

Eight Canadian stocks to keep an eye on this year

RBC recently released its “Top 30 Global Ideas” for 2023, which includes “high-conviction, long-term” investing picks. The list has a pretty good track record, David Leeder writes, with past selections delivering better returns than the benchmark. Canadian companies that made the list include software company Constellation Software Inc. (CSU-T), Quebec-based convenience store operator Alimentation Couche-Tard Inc. (ATD-T), oil and gas company Canadian Natural Resources Ltd. (CNQ-T), and Restaurant Brands International Inc. (QSR-N, QSR-T), which owns Burger King, Popeyes and Tim Hortons.

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Now that you’re all caught up, prepare for the week ahead with the Globe’s investing calendar.