Household debt in Canada rose to 171% of disposable income in Q3, according to Statistics Canada’s numbers released a week ago Friday. This is still below the country’s all-time high seen in the fourth quarter of 2019, though these numbers do show an increase from the 163% number released in the second quarter.
Household debt in Canada could become problematic for certain stocks tied to consumer spending in Canada. If you’re an investor in a retailer or company focused on the retail of consumer goods that require high levels of disposable income, these debt levels may become concerning for such investments. One must contextualize these large macroeconomic data releases, but one must also remain mindful of how such economic data impacts the underlying stocks in one’s portfolio.
Some companies may be completely immune to such data, and those are the one’s investors ought to focus on now, in my opinion. The Canadian consumer is likely to be largely tapped out for some time, with many Canadians now focusing more on debt reduction than frivolous spending, so keeping a close eye on how cyclical or defensive the investments are in one’s portfolio is a good way to gauge risk in today’s market.
Another reminder that stock prices are now around all-time highs in the current weak macroeconomic environment. While fiscal and monetary stimulus measures are expected to remain for some time to come, it’s also important to remember that the overall economy is not as strong as it was in previous decades, so some degree of caution is warranted right now.
Invest wisely, my friends.
