Welcome to your latest edition of “The Bottom Line” - Whether you're an investor or simply curious about finance, this is your monthly guide to stay informed.

Canadian consumers: mortgage refinancing a meaningful headwind



Interest Rates In the foreseeable future, we anticipate that interest rates will remain at historically high levels. If central banks see the need to reintroduce stimulus measures, they will likely use low rates as their primary tool. Central banks are considering holding rates at elevated levels as opposed to substantial increases ahead. Long-term, have we transitioned out of the era of low interest rates? In our view, unlikely.

A Word on Bonds Higher yields bring temporary losses that lead to better long-term returns. See example below for an Example of a 100K bond ladder invested in a rising and falling rate environment. 



Our view on a soft landing As students of history, we have seen repeatedly that a tightening of credit conditions very often acts as a precursor to economic downturns. Just such conditions are in place now, and at any time the scope of impact in the economy and stock markets may present. Although we remain hopeful, a prudent approach suggests that on review of the past we should remain prepared.

The Canadian Banks Owing in large part to the prospect of higher for longer interest rates, the Canadian banks are trading at significant discounts. For long-term income investors, we do not see risks to dividend payouts and however fail to see meaningful catalysts for near-term upside.

See our full report: Global Insight

Stay tuned for more insights and happy investing!