Canadian investors insulate themselves from inflation

As Bank of Canada turns hawkish, investors retool for higher rates outlook

Investors in Canada are staying off interest-rate sensitive stocks, in a bid to stay protected from inflation, while betting on a steeper yield curve as Bank of Canada sets the stage for others as the first to shift to a more hawkish stance.

Canada’s central bank on Wednesday warned it could increase interest rates as early as next year and slow down the rate of bond purchases, making it one of the first major central banks to cut down stimulus.

Greg Taylor, a portfolio manager at Purpose Investments predicts that other central banks will follow the Bank of Canada’s lead, making it a lot harder for stock markets to rise later in 2021. Higher rates directly cause a reduction in the worth of the future cash flows equities produce.