Gold is an asset that ‘should’ protect you from INFLATION.
I find it a bit surprising that other assets have reacted as they should with the ‘threat’ of rising inflation (such as bonds and interest sensitive equities) BUT gold has fallen.
For those that believe the inflation story this may be the time to take a position in gold as a hedge against rising rates and inflation.
The SENTRY GROWTH AND INCOME PORTFOLIO has a dedicated allocation to gold, precious metals and energy.
As you can see the index that tracks precious metals stocks has reacted similarly but not as dramatically.
For those with a stomach (and time frame) for more volatility the gains (and pullbacks) are potentially higher owning the stocks instead of the bullion.
One of the best managed REIT’s in Canada has been moving lower in anticipation (fear) of rising rates.
Picking this stock up between 42-46 dollars makes sense.
The consensus 12 month price target is $50+ and the yield is 4.1% giving a total return target of 17% over the next 12 months.
The BIG STORY since the election of TRUMP is not the stock market…it is the BOND MARKET.
Yields have JUMPED since the election going from about 1.8% for the 10 year US bond to 2.2% yesterday. That is on top of the already significant move from 1.4% in July of this year.
HOW DOES THAT EFFECT THE AVERAGE PERSON? Simply put…not in a good way!
The TD Bond fund went down 1.6% during last week and another .78% yesterday for a total drop of 2.38% over the last 6 days.
IS THIS A PERMANENT LOSS? NO IT IS NOT
DOES IT EFFECT YOUR INVESTMENT STATEMENT IN THE SHORT TERM? YES IT DOES
IS THIS INCREASE IN RATES PERMANENT? PERHAPS NOT
First and foremost currency moves are about interest rates.
Over the long term the move in the CDN$ versus the US$ is about the spread between bonds in the 2 countries.
HIGHER interest rates in the U.S. (and the potential to move higher still) are what causes moves in the currency.
There economy appears to be better footing suggesting higher short term rates than in Canada creating a weaker CDN$ versus the US$
The chart above shows the return for the most common markets we look at.
The TSX (Canada) has a gain of .23% over the last 22+ months
The SP500 (U.S.) has a gain of 5% over the last 22+ months
The XIN (Europe, Australia, and Far-East) has a gain of 3.93% over the last 22+ months
The Canadian 10 year bond has had a yield of less than 1.5% over that time
As I tell/preach/yell to clients we can only look at 5 year numbers when trying to average more than a 5 year GIC.
The 5 year numbers tell a different story.
The TSX is up 19.42%
The SP500 is up 72.89%
The EAFA is us 60.72%
The views expressed do not necessarily reflect the opinion of Argosy Securities Inc. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. Please consult a professional before making an investment decision.