08:16 AM EST, 11/12/2024 (MT Newswires) -- The United States and Canada are in totally different economic orbits, said Rosenberg Research.

The US has a 2.7% year-over-year real gross domestic product growth rate, while Canada has 0.9%, noted Rosenberg Research, adding that the former has a 2.4% inflation rate while the latter at 1.6%. The US has a 4.1% unemployment rate versus 6.5% of Canada while the US has a 6% deficit-to-GDP ratio and the Canadian one is at less than 2%.

The Bank of Canada has cut rates -125 basis points from the peak to 3.75% while the Federal Reserve has gone -75 basis points to 4.75%. This divergence in monetary policy rivals what markets saw from August 2005 to April 2007, and the peak divergence in recent history took place in the spring of 1997 when the policy rate spread got as negative as -250 basis points.

That means if the Fed gets to its estimate of "neutral" at just below 3%, investors could end up seeing the Canadian policy rate as low as 0.5%, stated Rosenberg.

That prospect means good returns in the Canadian government bond market and an ever-weaker Canadian dollar (CAD or loonie), and a test of the all-time lows of C$1.61 over decades ago surely cannot be ruled out, according to Rosenberg.