We are in a discouraging environment for income-focused investors: interest rates continue to be very low, while the stock market is vulnerable thanks to a long-in-the-tooth economic cycle.
We will not be rid of the knock-on effects of the 2008 financial crisis until global governments’ balance sheets are back in order and the ongoing financial repression lets up. These debts have arisen from a combination of quantitative easing and fiscal stimulus, and are typical of a financial crisis. However, we are still living under the shadow of 2008, even after a 10-year bull market. This is unusual.
When it comes to your stock portfolio, the low-rate environment favours dividend-paying and global stocks. Canada has some terrific companies to invest in — particularly banks and utilities — but what about technology, industrials, consumer stables, autos and drug companies? It’s critical to invest in safe and growing global stocks for sector diversification. We recommend a Canadian-centric approach, with 33 per cent Canadian and 67 per cent global.
2. Overweight good-quality and short-maturity corporate bonds, or better yet, Commercial First Mortgages.
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