LATEST INSIGHTS
Thoughts, insights and opinions from our team of investment experts.
Extending Duration
We expect the Bank of Canada to stand pat with interest rates, and there’s a strong possibility of cuts starting in 2024. Consequently, we have switched our duration stance from below benchmark to above; we’re now targeting investment grade bonds with duration greater than 7 years.
RJ Steinhoff, CFA on the Investment Grade Income Model
As safer and less volatile income securities, investors cannot expect the same total return that other income alternatives like high yield bonds, high dividend yielding equities, real estate, or infrastructure provide over an expansionary economic cycle. However, over the entire economic cycle, investment grade income serve as an important component within a portfolio, providing reliable income and low volatility and default rates.
Aversion to Reversion
Most don’t practice value investing—instead relying on buy and hold, momentum, or index strategies, all much easier on the psyche in the short term. To us, it’s simple common sense to embrace mean-reversion strategies—those offering better upside potential, especially during a period when most securities have downside risk since they are already at or above FMVs.
The Long and Short of It
The rise in interest rates has been felt across the U.S. economy. Commercial and Industrial loan growth is declining, for the first time since 2020. And it began declining before the recent U.S. bank failures, which were 3 of the 4 largest of its kind. We will continue to hone our short game—hedging portfolios—while playing the long game—owning high-quality companies we expect to grow their earnings and underlying valuations.