Interest rates have been cut by central banks across the globe and more cuts are expected going forward. But what does this mean?

This is the first major rate cut in some time and is a welcome relief from the COVID-inspired trend of continually raising rates. Historically, though, rate increases and cuts are part of the economic cycle. The problem is we have no accurate way of measuring how long periods of rate cuts, rate increases, or rate stability can last.

The start of September has not been a picnic for investors. Markets have been volatile. Investors are wondering if there is a bear in the woods. That fear and uncertainty has created challenges for investors, and we’re seeing big swings. The bear here is recession, and the fear is that interest rate cuts in the United States (U.S.) may not support economic growth as expected.

For a long time we’ve stated that one of our goals was to remove industry jargon from the conversation about investing and investments. That’s because we see so many examples of jargon in the financial press. I’m not sure who the intended audience is, but it certainly can’t be real people. This week I was asked about the difference between a tax and a tariff.

At the beginning of the year, if we had swung a hammer in a room full of industry analysts, no amount of fancy footwork would have made it possible to avoid injuring at least one or two analysts who were predicting several or more interest rate cuts early during the year to tame inflation. And they would have been wrong! Because as we all have witnessed, interest rates were held higher for longer, as governments continued the battle against inflation.

Who hasn’t looked at a bunch of dots and instantly seen squares or lines? The human brain is wired to find patterns. It’s an evolutionary advantage. Patterns helped our early ancestors understand when to plant crops or how to ensure success during a hunt. It also kept us safe. That shadow at the edge of the forest that breaks the pattern of the tree line – it could be a predator. Be prepared.

Non-profit organizations such as charities, endowments and foundations play a vital role in society. According to Imagine Canada, there are over 170,000 charitable and non-profit organizations in Canada - 85,000 of these are registered charities. Many Canadians have donated time or money to a charity or non-profit at some point. The truth is, most Canadians will interact with hundreds of non-profits and charities over the course of their lifetime.

At the Paris 2024 Olympic Games, there are 32 sports and a total of 329 events. As a results, almost 1000 medals will be awarded. If past Olympics are any indicator, several athletes may win more than one medal. So, it could be that only 400 or so athletes out of 11,040 total will actually win a bronze, silver, or gold.

But what does this have to do with investing?

So…the Bank of Canada (BoC) did what it was widely expected to do this week and lowered interest rates to 4.5 per cent by implementing a 25 basis points (0.25 per cent) cut. It also signalled that more cuts could be coming in a few months’ time. The cut brings some relief to borrowers who have been struggling to make regular interest payments.

The 1964 movie “Goldfinger” (based on the seventh novel of Ian Fleming’s James Bond series) featured criminal mastermind, Auric Goldfinger. He is a man who, in the words of the great singer, Shirley Bassey, “is the man with the Midas touch.” The first two letters of his first name are “Au” (the symbol for gold on the periodic table of elements). Not exactly the most original of names, but we digress.

But Goldfinger isn’t alone. Over the centuries gold has been cherished and revered. From ancient Egypt to Spanish galleons and the Klondike gold rush, the love and lust for gold has been relentless.