Fixed income portfolio manager Sri Tella discusses global trade, government debt levels, low interest rates and their impact on Canadian investors. Sri believes the environment for the bond market will be challenged over the next year or so with pressure for rates to move higher and central banks removing some stimulus. He explains that negative bond returns are typically followed by a high single digit return for bonds the following year; and while we can’t time the market and will likely see some volatility, it’s important to stay diversified, and bonds can offer protection for increased volatility. Sri attributes the strength of the Canadian dollar to the U.S. dollar’s weakness. The Canadian dollar hasn’t performed well compared to other countries and the U.S. seems to be on a trajectory of faster growth than Canada – though Canada’s numbers are surprisingly good. The Federal Reserve has indicated it’s willing to let the economy run hotter, which could keep rates lower than Canada.
Recorded on March 4, 2021.