This week’s Around The World (ATW) takes a closer look at the menacing threat lurking just under the surface this summer. No, I’m not talking about anything we have to worry about when jumping into the lake up at the cottage, but interest rates (cue ominous music)! The threat comes in the form of higher rates, placing a strain on the household budgets of already cash-strapped Canadians. It’s said that the only two certainties in life are death and taxes, but for the foreseeable future you can add rising rates to that list.
Beyond a hit to the pocketbook, higher rates will also hit portfolios hard, with government bonds moving lower as rates move higher. The outlook for this asset class is a zero to negative rate of return, as bond prices fall by more then the meager returns offered through government issued debt.
So what does mean for your portfolio? Well for starters, unless you are prepared to earn nothing on this component of your savings, alternative asset classes will need to be seriously considered. The good news? We have all summer to look at these and I look forward to speaking with you in this regard. Please call me or my office to set up a time to meet or conference call.
And outside of interest rates, here’s looking forward to a great summer! Environment Canada’s forecast on temperatures matches our Central Bank’s on rates. They’re heading up!