Passive balanced and globally diversified mandates have struggled in 2021 as government bond yields have risen and the Canadian Dollar has strengthened. However, if you have made room in your portfolio for some tactical strategies, as we offer in our High Rock Tactical Model or in our Fixed Income Model (less exposure to government bonds), your portfolio may well have significantly outperformed those balanced mandates (if you missed it, check out our Monthly Video for June). At the same time, you are likely exposed to less risk as stock market indices continue to bubble up while the central banks remain committed (for now) to their easier monetary policies and valuations remain lofty. If stock markets were forward looking to the recovery back in mid to late 2020, at some point they will have to start looking forward to 2022 /23 when monetary policies will tighten and bond buying will taper. Stock market indices will have to re-assess that in due course. Manage your expectations and risk accordingly. Tactical strategies will be back in vogue as passive portfolios succumb to lower stock prices and higher bond yields (lower bond prices).
The “look out for inflation” narrative is running out of steam as supply chains return to normal and pent-up demand / stimulus-related spending (economic growth, post pandemic re-opening) begins to slow.
Flip your Bitcoin: heads it goes back to $65,000, tails it goes to $0. Count me out of that risk. Certainly those who bought at $65,000 are hoping for heads.
Taxes are not going down. In fact, I would be prepared for the opposite: global corporate taxes were agreed to at the G7 and capital gains tax rates are vulnerable.
Record amounts of debt at the government level will guarantee that. If interest rates go up, as they most likely will at some point, that will just exacerbate the debt. Highly indebted and leveraged (because of lower interest rates since the pandemic began) corporations and households debt service costs will also rise, don’t lose sight of that (we are closely following that narrative).
Again, manage your expectations and risk accordingly. Remember that it took the NASDAQ 16 years to get back to its 2000 highs, the S&P 500 took 13 years to break above its 2000 highs. That will be a long wait for those who just sit idly by thinking that the next 12 years will look exactly like the last 12 years.