Dean - you sure could be right on rates going forward. It will all depend on what happens with inflation and the economy going forward. We have China re-opening after Covid, an ongoing war in Europe and who knows what else may happen. It sure was a tough year for investors. The typical 60/40 equity/bond portfolio had its worst year in our lifetimes last year. There really wasn't many places to hide other than energy for the most part.
There sure is a lot to be said for holding solid dividend paying companies, especially ones that have a history of steady and increasing dividends. The defensives like the utilities and telcos should do well if rates fall just from the perspective of the present value of their future cash flows becoming more attractive. But vice versa if rates do rise from here, those cash flows don't look quite as good. They also have that type of business that is relatively appealing if we do enter a stronger recession than expected.
I haven't really done much with my portfolio this year, still overweight energy, market weight utilities telcos, underweight financials. I finally sold some gold and added a bunch to the gold miners on Oct 24. I also got nailed with a small position in Algonquin Power which we unloaded entirely. Even the so called safe defensive utilities can bite you in the rear end if you neglect the homework. Lesson learned.
We got the .25% increase from the BOC which was expected and the messaging that they are pausing for now. Here is a copy/paste from the linked article which is behind a paywall.
And like you say, good luck all.
“We have raised rates rapidly, and now it’s time to pause and assess whether monetary policy is sufficiently restrictive to bring inflation back to the 2-per-cent target,” Bank of Canada Governor Tiff Macklem said in a news conference after the rate announcement.
“To be clear, this is a conditional pause,” Mr. Macklem added. “If we need to do more to get inflation to the 2-per-cent target, we will.”
The bank lowered its forecast for inflation on Wednesday. It also reiterated that it expects the economy to “stall” in the first half of the year, but does not foresee a significant recession.
The bank now expects consumer price index inflation to fall to about 3 per cent by the middle of this year, and to 2.6 per cent by the fourth quarter. It sees inflation returning to the 2-per-cent target in 2024.
The annual rate of inflation remains well above those levels, clocking at 6.3 per cent in December. But it has trended down from a peak of 8.1 per cent in June. Price pressures continue to ease thanks to a drop in oil prices and improvements in global supply chains, plus the slowing effects on the economy of the bank’s rate increases.
The expected drop in inflation comes alongside a slowdown in the Canadian economy. The bank expects growth to flatline through the first half of 2023, as higher borrowing costs squeeze Canadians’ finances and weigh on consumer spending and business investment.
“It’s just as likely that we’ll have two or three quarters of slightly negative growth as slightly positive growth,” Mr. Macklem said. “So yes, it could be a mild recession. It’s not a major contraction.”
https://www.theglobeandmail.com/busi...-2023-macklem/