HIGHLIGHTS OF THE WEEK – Nov. 26/12

• Markets and businesses are rightly worried about the outcome of fiscal negotiations in Washington, but behind the scenes are signs that U.S. growth ismoving to an accelerated trajectory.
• The biggest headwind to economic growth – the housing market – is becoming a tailwind. This week, existing home sales and new housing starts both increased, beating market expectations
• The turnaround in housing offers an opportunity for policy makers. As Chairman Bernanke said in a speech this week, “cooperation and creativity to deliver fiscal clarity…could help make the new year a very good one for the American economy.”

• Financial markets’ mood started to improve this week, with equity markets making up some lost ground and the Canadian dollar back above parity.
• Canadian data, however, shone a light on the biggest domestic risk to the economy – heavily indebted consumers – and the impact on Canadian retailers.
• Consumers can no longer be the engine of economic growth. Add high levels of cross-border shopping and limited pricing power to that modest