The chart below shows that interest rates in the UNITED STATES are higher than they were 2 years ago over all time frames. That is not the case for Canada with short term rates (1-3 years) not moving much recently and longer term rates (3-10 years) still no higher than 2 years ago THOUGH certainly higher than 1 year ago.
What does that mean for most of us?:
If you owned a typical bond fund (think TD bond) you have moved from a gain of 3-4% for the year to FLAT for the year.
If you are applying for a mortgage the 5 year fixed have started to creep higher
If you are using PRIME rate (minus discount) then nothing has happened…YET
Potentially weaker CDN$ versus the US$ as currency moves are ultimately about interest rate differential THOUGH recently the rise in OIL has protected the LOONIE.
Linked to interest rates is the following article from the Globe and Mail stating that Real Estate sales across Canada have slowed at the worst rates since 2012.
GOLD has been a loser at the same time interest rates have risen over the last several weeks and has certainly underperformed equity markets as the following chart shows. HOWEVER as we get close to the lows of late 2015 we may need to consider this as an ACCUMULATION opportunity for diversification. ACTUAL INFLATION (yet to be seen) and a WEAKER US$ would both benefit GOLD BULLION.
MY OPINION (for what it’s worth): interest rates moves higher may have been a bit quick and overdone so I would not be surprised to see a rebound in government bonds in the first quarter of 2017 as inflation and growth fail to appear. I am definitely in the camp that demographics (rising average age) will drive interest rates. Higher percentage of population close to or in retirement suggests higher savings levels and less discretionary spending keeping a lid on GDP growth and as such the need for higher rates.
For those looking to MAXIMIZE their RRSP contribution and MINIMIZE TAX we have our 2016 tax software available. When you have your YEAR END pay info (not the t-4) please scan and forward the information to me so that we can complete the TRIAL TAX RETURN.
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.