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SHIFTING EQUITY AND FIXED-INCOME POSITIONING IN CANADA
9/24/2017 6:24:56 AM
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By Fund Library News Wire  | Wednesday, September 28, 2016




By Kurt Reiman, Director, Chief Investment Strategist for Canada

Globally, investors have been piling into investments like gold, U.S. equities, and emerging market debt, but recent positioning in Canadian stocks and bonds is less crowded. Here are some reasons why.

Compared to the wild market gyrations witnessed last summer when China devalued its currency, this August has been rather placid. Although the economic data hasn’t been terribly robust in recent weeks, it hasn’t been disastrous either.

Meanwhile, the big financial news story of recent weeks has been whether the Fed will raise rates again during 2016, which just goes to show how starved the media has been for real headlines. With little to jolt investors into making meaningful shifts in portfolio positioning, volatility has remained muted and market participants are showing a tendency to gather around some of the same trades.

This isn’t necessarily a bad thing. As we wrote in our Global Weekly Commentary, some popular overweight positions still look attractive to us, such as our preference for investment-grade credit and emerging market debt within fixed income, as well as our interest in gold as a portfolio diversifier. One out-of-favor area we still like is emerging market equities, which show up as a modest underweight on our dashboard despite the recent enthusiasm.

What do we see when we fix the lens on Canada? Earlier this summer, just before the Brexit vote, Canadian fixed income had become a popular overweight while Canadian equities had been something of a modest underweight (see the chart below) among global investors. Since then, positioning in Canadian assets has become much more balanced, implying less crowdedness on the part of investors.

The shift away from an underweight to a more balanced assessment of Canadian stocks likely reflects how strong year-to-date gains and investor enthusiasm for precious metals have attracted inflows. That said, modestly high valuations and tepid Canadian economic activity have likely constrained enthusiasm.

Meanwhile, the less aggressive overweight to Canadian fixed income is likely a result of the post-Brexit decline in interest rates and likely better opportunities in other corners of the bond market.

Kurt Reiman, Director, is BlackRock’s Chief Investment Strategist for Canada and is a member of the BlackRock Investment Institute (BII).

Notes and Disclaimer

© 2016 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. This article first appeared on the BlackRock website. Used with permission.

Important information

Past performance is not a guarantee of future results. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

© 2016 BlackRock Asset Management Canada Limited. All rights reserved.

iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. Used with permission. iSC-2461

 

 
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