High debt levels causing ‘pressure beneath the surface’ of household balance sheets, says BMO economist

“Canada’s household mortgage debt service ratio dipped in Q1, to a still-high 8.1% on a seasonally-adjusted basis. That’s just down from the highest levels since at least 1990 set in prior quarters. Below the surface, however, conditions continue to deteriorate as households are diverting more of their mortgage payments to interest, and less to principal. As of Q1, the interest portion rose to 5.

I’m continuing to watch retail sales data as the main indicator of credit stress and the next data point there comes out on June 21.BMO global oil strategist Brian Leisen is concerned about the middle east conflict spreading to Lebanon, “Since the start of the Israel -Hamas conflict, we have warned that an expansion of the war to Lebanon could be the pathway to a much wider regional conflict given Iran’s unyielding support for its most important proxy Hezbollah. On Tuesday, an Israeli airstrike killed senior commander Taleb Abdullah — the most senior Hezbollah official to be killed since the group entered the conflict on October 8 — prompting vows of further retaliation.

“Risky Business continue to be the highest ranked theme overall. The best Value theme is Biofuels while Global Tourism offers the best Growth exposure. Price Momentum is the strongest for Defence while Creator Economy has the best Estimates Momentum. The theme with the highest score on Quality is HR Tech. Bottom Themes — The lowest ranked themes consist mainly of Health Care themes though Greening the Home is currently at the bottom of the table, scoring poorly on all styles.

“Creator Economy” is a broad category covering podcasts, education, ad-based video, fee-based video, eSports, social media, publishing, video games, the metaverse and eCommerce.

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