It looks as though Bank of Canada interest rate cuts may come sooner than those of our neighbours to the south. Last week and over the weekend, Federal Reserve chair Jerome Powell made it quite clear that unless inflation hits 2%, there would be no cuts.
However, here in Canada the situation looks as though it might be different.
Experts agree
Canadian market experts recently participated in a survey, and agreed that rate cuts should start to lower by April. It would mark an end to the 22-year high of 5%, something investors have been praying for.
The survey by the Bank of Canada looked at economists and financial strategists, asking their opinions back in December. This came before inflation data officially came out for the month of December. Data that showed inflation actually climbed, rather than dropped.
Annual inflation rose to 3.4% in December, up from 3.1% the month before, according to Statistics Canada. Even so, experts agreed that by the end of 2024, the policy rate should be down to 4%. This was the same belief these experts forecasted back in November as well. And while it doesn’t like we’re going to see an earlier rate cut in March, it could come at a reasonable time in April.
A sector to consider
If there is one sector that analysts believe will be a huge benefactor to falling inflation, it’s going to be infrastructure. Interest rates have made it hard for these companies to deal with often times a huge backlog in projects. A backlog that’s only rising higher.
The cost of supplies, whether it’s building homes or bridges, have risen thanks to inflation. Yet taking out loans for these projects has also proven difficult, as interest rates make it quite expensive to chip away at these projects.
Yet once interest rates come down, along with inflation, it looks as though there could be a surge in these projects underway. So right now, though these companies continue to struggle, they offer strong value. And there are a few investors might want to consider right away.
Infrastructure stocks to buy now
While 2024 might continue to be a hard year, investors are urged by analysts to think through to 2025. Spending growth will likely remain slow this year, but should pick up again through 2025. The best value then lies with small and mid-cap stocks. Especially as consumer sentiment improves both in Canada as well as in the United States.
Perhaps one of the best buys right now then would be to consider Badger Infrastructure Solutions (TSX:BDGI). In fact, BDGI stock hit 52-week highs recently, but analysts still believe there is a lot of value in the stock. Especially as earnings creep closer.
Shares of BDGI stock currently trade with a 1.48% dividend yield. It also offers strong value through its fundamentals, trading at 1.8 times sales and 4.8 times book value. It would also take just 88% of its equity to cover all its debts, making it a safe investment for growth and dividends. So when it comes to growth in the near and long-term, definitely consider infrastructure stocks like BDGI stock for when we get into interest rate cuts.
