After a challenging 2022, investors have been rewarded with a strong last 18 months. How much longer can this growth cycle last? We don’t have a crystal ball but history tells us that growth phases average four to six years. On top of this, interest rates are poised to decline due to inflation coming back into the central bank’s target range. Lower costs for borrowing put consumers and businesses in a healthier position to spend into the economy and bond values generally increase when interest rates decrease. The chart above illustrates how declining interest rates have historically been very good for both the stock market and bond market, especially compared to cash/GIC returns.
As you can see, not only have bonds and stocks done well 1-year following the final interest rate hike (dark blue bar), but also the average of the 5-years following the final rate hike (light blue bar). As always, along with our world-class team of portfolio managers, we will continue to look for opportunities and adjust our portfolios as necessary.
Eydt Wealth Partners
