“This opens a door for a bit of a pivot and downshifting a little to see what the impact of the rate increases is on what occurred this year,” he said.
In the meantime, he is reminding his investors to take a longer-term approach, especially now that bond yields and dividend yields are higher while growth stocks are down, and valuations have declined dramatically. “There are more investment opportunities for those who have a medium to longer term investment timing horizon,” he said, noting that stocks are still a good inflation hedge, particularly for companies that are still able to grow their business and their dividends. And have strong management teams and high insider ownership.
“We’re going through one of those pessimistic periods that were set up for positive surprises and you just want to stay focused and stick with an asset allocation that you’re comfortable with and not respond to what’s happened, but position for what the future holds as well.”
Chad Larson, a senior portfolio manager, senior investment advisor, and founder of the MLD Wealth Management with Canaccord Genuity Corp., said he was initially disappointed that the Bank of Canada didn’t do the 75 basis point increase. But, he then considered the unprecedented amount of pandemic stimulus that it was trying to counter. That’s already impacting housing and could soon impact employment, too, even though the bank flagged that it would continue to increase rates and not yet become less hawkish.
“I originally thought that they would raise the rates by 75 basis points, even 100, and nuke the market – create the kind of job loss nuclear winter that melts inflation,” he said. “The problem is if they don’t let this tighter monetary policy linger for long enough, and they start cutting, all they’ve done is throw a wet blanket on inflation. So, the Bank of Canada’s decision to do a smaller than inspected increase just reconfirmed to the market that more will need to happen. So, I think this is shockingly the right call now and I think the message is more pain for longer.”
