Welcome to the winter 2024 edition of Bond Capital TV. I’m Davis Vaitkunas, a partner at Bond Capital.
Happy New Year.
If your business wants to get more in 2024 you will need to hope for the best and plan for the worst. We suggest business forecasters model and stress test 11% to 13% cash cost for US interests and 10% to 12% cash cost for Canadian interest. If things continue to behave, this sensitivity should leave funding for CapEx and talent retention needs.
The current US primary is 8.5% and the next FOMC interest rate meeting is scheduled for January 30th to 31st. The current Canadian prime rate is 7.2% and the next bank Bank of Canada interest rate meeting is scheduled for January 24th. On these dates, these central banks will determine if they’re going to raise rates, decrease rates, or keep them the same. We are expecting both of these central banks to keep rates the same with a possible bias, small bias, towards an increase.
The interest rate risk of 2023 is expected to become credit risk in 2024. This means, now, that we know the cost. Can your business afford it?
Bond expects higher for longer rates. We think inflation appears to be improperly defined and higher than presented. I certainly see this in the cost of Pepsi, Doritos, the cost of a steak, as well as the cost of insurance which has probably risen the most. All of these items are high single digits and in some cases like insurance well into the double digits.
For the record 370 trillion of total global debt withstanding there is a risk of a central bank debt trap. This coupled with Central Bank concerns for a repeat in policy error, causes us to think there will be a delay into interest rate reduction.
On the surface, the economy seems okay with energy costs and unemployment statistics both acceptable. However, there is much more concern lurking near the surface than usual. 50% of the world’s population is set to vote in 2024. In addition to conflict expansion, energy transition concerns, and artificial intelligence, whatever that is going to be.
Good luck I wish you the best with your modeling and your forecasting. I hope our stress test knowledge helps you out. This has been Davis Vaitkunas of Bond Capital from Bond Capital TV.