Canadians have responded to stock market volatility and economic fears by stashing money in savings instead of investing, according to CIBC economists Benjamin Tal and Royce Mendes.
In a commentary published January 26, Tal and Mendes calculate that Canadian investors are hanging on to a record $75 billion which could otherwise be invested. The economists warn that if Canadian savers hang on to this cash for too long, they could miss out on billions in investment returns.
That has been the pattern in the past, when Canadians rushed to move money to savings following the 1987 and 2001 stock market crashes and 2008 financial crisis and recession. Tal and Mendes argue that in all of those examples, Canadians kept money in savings for too long: for instance, missing the “bull run” of 2003, and keeping money in savings for 18 months following the 1987 stock market crash even though the correction lasted just two months.
Already spooked by 2008’s great recession, Canadians are saving at higher rates than ever before.
“As a result, we’re currently witnessing the creation of personal cash buffers that are larger than at any other time on record,” say Tal and Mendes.
@jenstden
