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Interest rates remain high, inflation won’t let go and there’s talk of a recession this year. Now that we have the negatives out of the way, let’s look at some positives for your finances and investments in 2023. Yes, there are some.

The end of interest rate increases

The central bank had eight opportunities to adjust its benchmark overnight rate in 2022 and raised it seven times by a cumulative four percentage points, which is massive. There will another eight rate-setting dates this year, but they’ll be much less eventful.

Persistent inflation means we could see a modest rate increase early in the year, but 2023 will be a year where the central bank mostly keeps rates the same. If you have a variable-rate mortgage, line of credit or floating-rate loan, you won’t have to hang on each rate announcement to find out how much more you’ll have to pay. We are near the worst right now.

By the second half of 2023, expect to hear speculation on the timing of rate cuts by the Bank of Canada. Inflation must come down for rates to fall, but the central bank also has to be careful not to push the economy into a deep recession by keeping rates high for too long.

The end of greedflation

Inflation caused by supply chain disruptions, war in Ukraine and enthusiastic consumer spending was bad. Then, some businesses made things worse by jamming customers with above-and-beyond price increases – so-called “greedflation.” Anyone recall hotel and rental car prices last summer?

Greedflation will fade in 2023 because it can only survive in a free-spending environment where people pay up for what they want regardless of price. The economic consensus is that 2023 will be a year of cutting back on spending.

Here’s CIBC Economics on a Statistics Canada report showing stagnant retail sales in November: “Today’s data suggest that goods spending is going nowhere fast, with inflation and higher interest rates denting households’ desire and ability to increase spending volumes.”

TD Economics on the effect higher debt costs will have on spending: “We expect consumer spending growth to stall over the course of 2023 and much of the excess saving built up during the pandemic to be drawn down by the rise in debt service costs.”

Bottom line, we won’t be competing with each other to buy goods and services. Some businesses might even have to cut prices to keep customers.

The end of the long, dark night for balanced investment portfolios

In 30 years of writing about business, economics, personal finance and investing, I have never seen both stocks and bonds lose serious money in the same year. Bonds have always been described as your portfolio’s personal flotation device. When stocks fall, bonds keep you afloat.

Soaring interest rate rates hurt bond prices in 2022, which meant sharp declines in the value of exchange-traded funds and mutual funds holding bonds. As financial markets gain confidence that inflation is coming under control, we will see bonds rally in price. That’s good for the bond side of your portfolio.

As for stocks, they will rebound from the declines of 2022 when there’s a sense that inflation is beaten and the economy is stable. The traditional balanced portfolio of 60 per cent stocks and 40 per cent bonds was toxic last year; over the next two years, it could mean double-barrelled performance.

Better affordability for homebuyers

House prices are falling, which is painful for recent buyers who thought the equity they had in early 2022 was in the books for good. For young buyers waiting for an opening into the market, the news is far better in two specific ways.

One is obvious – cheaper houses mean lower monthly payments, even with mortgage rates at elevated levels. The other is that new buyers have to save less to build a down payment.

The Globe and Mail’s mortgage expert, Robert McLister, pointed out in his newsletter MortgageLogic.news that median prices in the greater Toronto and Vancouver areas were below $1-million in late 2022. First-time buyers need a down payment of 20 per cent or more when houses cost $1-million and up because mortgage default insurance is unavailable at that price level.

With houses below $1-million, it’s possible to buy a house with a down payment of as little as 5 per cent. For a house at $975,000, the minimum down payment would be 7.44 per cent, or about $72,500.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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