With the warmest winter in 40 years we only temporarily saw oil move below $60 a barrel. This is a good indication of how oil prices are difficult to move down.

The Fed is looking to increase rates south of the border and the predictions are for stability and a 50 bp rate cut in 2007. In Canada the prediction is for another rate hike to 5.00 and stability and a 50 bp rate cut in 2007.The Cdn dollar remains strong, supported by high commodity prices.

The TSX has done well and the forecast remains 13,200 by year end. Unlike the late 90's rally this increase is well supported by strong fundamentals. 20% rise in earnings and strong commodity and resource prices that pushed higher by supply constraints.The forecast remains strong for Bonds. Even though we've seen a rise in bond yields to 4.35 for a 10 year, the forecast is for Bond Yields to drop throughout the year by 65 bps and by another 25 in 2007.

Ben Tal writes an article about the impact of the warmest winter on record in Canada and how that can cause short term economic distortions, making the economy appear stronger than it really is. As an example a mild winter resulted in a 35% surge in housing activity, allowing workers to continue to work on homes they otherwise couldn't in regular winter conditions.CIBC World Markets Forecasting

Implications: Shifting now from Variable to Fixed mortgage rates will probably be proven a mistake 5 years from now, albeit not a big one. While variable rate mortgages will not be as attractive as it used to be in the past five years and the savings will not be as significant (at least in the next 2-3 years), they will continue to outperform. The likelihood is that we are getting closer and closer to the end of the tightening cycle.