Good News is Bad News

Good day,

A number of years ago I entitled a particular Finish Line commentary “Bad News is Good News”, as the then regular news of poor economic data kept driving up stock prices as investors felt confident the US Fed would keep interest rates low. This week, I’ve flipped the title to “Good News is Bad News” as the opposite seems to be happening.

The global economy continues to be strong and solid jobs data out of the US this week has investors convinced that the fed will once again increase rates next month to cool the economy, which has sent markets lower this week. We’ve been spoiled with extremely low volatility for a number of years but with stock valuations on the high side coupled with a rising rate environment, this will likely change this year.

As a reminder, rising rates hurt bond prices which is why we are underweighting bonds and increasing allocation to alternative investments— those that are uncorrelated to equity and fixed income markets. We are targeting a 7-8% return in our private debt allocation with minimal volatility. This should smoothen out any bumps from equity markets but as always, we will snap up equities if the selloff continues.

Have a great weekend.

Danny

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Daniel Popescu CFP, CIM, FMA, FCSI
President & CEO

MNP Tower, 3100-1021 West Hastings St.
Vancouver, BC V6E 0C3
T: 604-558-6830/1(877) 588-6822
F: 604-558-6823
harbourfrontwealth.com

 

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