Finance
Making sense of the markets this week: April 16, 2023 – MoneySense
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The BoC increased its balance sheet from $120 billion in March 2020, to more than $575 billion at its peak during the pandemic (March 2021). It’s actively been reducing its balance sheet since April 2022 by letting its bonds mature, as well as selling bonds back to financial institutions. As of February, the balance stood at $393 billion.
Clearly there’s substantial “dry powder” for the monetary policy wonks to deploy, should they want to continue to reduce the amount of money in circulation without raising the interest rate.
News that the 4.5% key interest rate might be hanging around for a while is a boon to cautious savers who rarely have loans to pay off (think retirees who own their own homes). However, this will clearly be tough to take for those with mortgages coming due in the near future.
Put your money where your mouth is
Does the price of lettuce seem more volatile than crypto or tech? Well, you know there’s a tracker for that. Check out Inflation Cookbook, an online resource from Skip The Dishes that compares the weekly price performance of over 400 key foods from major Canadian grocers coast to coast. That’s some food for thought.
TINA, meet TIAA
In the years leading up to (and most definitely during) the pandemic, it became fashionable to say “There Is No Alternative” (TINA) when discussing the prospects for equities versus fixed income or other assets.
Sure, valuations were high on stocks, and dividend yield levels weren’t blowing anyone away. But, what were you going to do? Earn 1% per year in bonds? Throw your money at meme stocks or bitcoin? Hence, in many ways, there was no alternative to investing in stocks.
It turns out, investing in stocks, especially if you tilted your portfolio towards profitable companies—as opposed to debt-fuelled growth stocks—was actually a pretty good idea. But, past results aren’t always indicative of future returns.
Given how high interest rates have been for the past year or so, combined with inflation pressures to keep those rates higher for longer, you have a recipe for a very viable alternative to stocks, indeed. It may have taken investors a while to break up with TINA, but suddenly interest in TIAA—There Is An Alternative—is way up.
Not much of a surprise but @Google search volume for terms like “yield,” “Treasury Bill,” and “Certificates of Deposit” has surged to record high (since data started in 2004) … search activity for “money market” at highest since 2008
@DataArbor pic.twitter.com/4D29PmgjeR— Liz Ann Sonders (@LizAnnSonders) April 6, 2023
Liz Ann Sonders, chief investment strategist at Charles Schwab & Co, points out that the number of investors looking to snag a very low-risk 5% worry-free return is at all-time highs.
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Kyle Prevost
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