This morning, the Organization for Economic Co-operation and Development (OECD) with an interim update on the global economy, suggested that a potentially better growth outlook was at risk on a number of fronts:
1) Protectionism: "foremost among these there is the risk of rising protectionism that would hurt global growth and impact the large number of jobs that depends on trade".
2) Debt: "the rapid growth of private sector credit and the relatively high level of indebtedness is a key risk in a number of emerging markets, above all in China, and housing valuations are a matter of concern in some advanced economies."
3) Valuations: "the strength of financial market valuations appears disconnected to the outlook for the real economy where growth of consumption and investment remains subdued."
4) Interest Rates: "there is also a risk of global financial market tensions as interest rates adjust and diverge across the major economies".
To a significant degree, this is a validation of most of our High Rock "Themes For 2017" (which we discuss each week on our weekly client webinar: http://highrockcapital.ca/current-edition-of-the-weekly-webinar.html ) which address all of these issues. Most importantly, what we focus on is the potential impact on our and our clients investing strategy.
We have to ensure that the risks that we are taking, to get reasonable risk-adjusted returns, are within the framework of the investment policy of each of our clients.
Currently, the "risk-free" rate of return is at or about 0.50% (which is the return on a Govt. of Canada 90 day T-bill). Any return above that (on an annualized basis) will have risk associated with it.
So anyone who tells you that a balanced portfolio is a low risk method of generating reasonable returns needs to be asked:
Exactly what is the risk?
Anything other than a number that expresses the return per unit of risk is less than acceptable.
Want to know your return per unit of risk?
Get in touch...
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist