Today we welcome back Fidelity Director of Quantitative Market Strategy Denise Chisholm. Denise discusses the correlation between oil prices and equity markets, rising rates and what it means for the US and the Canadian economies, and what top sectors she has in mind. Denise explains what would cause a shock in oil prices in consumers. She says when she thinks of shock its historically has historically needed to be that big and quick to take the consumer down. She points out in 2008 the consumer didn’t collapse on itself until the shock came from the Fed and oil prices. And she adds in this cycle and in most cycles it takes a long time for interest rates to provide a shock to debt service. Plus in the US mortgage debt is locked in at 3 per cent whereas in Canada that mortgage debt is mainly at variable rate. Denise also touches on rising rates and the impact on the economy. She says it’s not important that the rates are rising, it’s the why behind higher rates and higher oil prices. Rising rates are a bad thing when you also have falling growth in the economy but GDP remains steady with an acceleration in real growth GDP. She adds growth in GDP is more important than interest rates as it relates to the equity markets. The question becomes, “How fast can your economy grow without a problem?” In some ways the US has been able to grow a little bit faster without a problem relative to Europe.

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