On September 7th, the Bank of Canada has (unsurprisingly) increased its overnight lending rate by 75 basis points, to 3.25%. The Bank also confirmed it will continue its policy of quantitative tightening.
Overall I’m encouraged to note that inflation appears to have peaked, while commodity prices have fallen and global supply chain pressures continue to ease. Housing markets have also cooled following successive hikes, which includes the 100 basis point increase we saw in July. Given that the BoC’s target inflation rate is 2%, a further softening in household demand is needed to bring it down more.
On September 1st, our Global Portfolio Advisory Committee wrote the attached piece in reference to Fed Chairman Powell’s keynote speech at the recent monetary policy symposium. Sentiment appears to be the same south of the border, in that fighting inflation is the number one goal.
The article goes on to say, “For the individual investor with a long-term view, we would argue that the hype around the speech emphasizes the importance of looking first and foremost at asset allocation and long-term planning. No one has a crystal ball, and attempting to time the market—even in the guise of predicting monetary policy moves—is unlikely to be beneficial to investment returns.”
The above comments are in-line with my thoughts and generally reflects how I continue to view and structure most portfolios. Recently, I’ve begun (after many years) to dip into the “GIC pool” (where warranted and mostly in registered accounts), but I still believe in the power of dividends and equities in general, in terms of growing wealth and/or providing a steady stream of income.
I’m all too aware that this current bumpy period can be frustrating, but don’t let it distract you from your ultimate longer-term goals.
Libby
The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc.* nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc. and Royal Bank of Canada are separate corporate entities which are affiliated. *Member CIPF. ®Registered trademark of Royal Bank of Canada. Used under licence. ©Copyright 2004. All rights reserved.
* All rates, yields and prices are subject to change