Fully Invested, Globally Diverse Portfolio Stalling? Thank The Bank Of Canada.

Two quick 1/4% rate hikes to stall the potential inflationary impact of strong GDP growth in the first half of 2017 (when inflation and the future expectations thereof are currently non-existent) is driving the value of the $C higher (by more than 12% vs. the $U in the last 5 months) and the value of your globally diverse, balanced portfolio lower.

Let's use the All Country World (equity) Index ETF (ACWI) in $C terms (which your consolidated portfolio is ultimately denominated in) as our proxy:

Total return (per the above chart) has added about 12.5% over the last year. If you have 60% of your fully invested portfolio in global equities, that would be impacting your portfolio positively by about 7.5%.

If you have the other 40% in Canadian bonds, let's use the Canadian Bond Index ETF (XBB) as our fixed income proxy:

Total return over the last year is a negative 2.75%. If your fully invested portfolio is 40% fixed income, that would be impacting your portfolio by a - 1.1%.

Therefore, your total portfolio return, before fees would be only up by about 6.4%. 

This is pretty simplistic, but enough to draw comparisons as to how your own portfolio's  have been performing over the last year (remember to include fees and costs). Ask your advisor. If they don't know, exactly, they are either hiding something or they just don't know what your risk profile is.

If you have had tactically less exposure to the $U, bonds and / or international equities, then you may have faired better.

At High Rock, we manage risk first (and we know exactly what each clients risk profile is). We have been tactical about our various exposures because we don't think that historical correlations are offering the same protection as they used to.

The Bank of Canada has seen to that recently. 

Even if you have been over-exposed to Canadian equity assets (see Paul's blog today) you will not have benefited from Canada's recent run up of GDP.

Markets are scrambling for answers and knee jerk reactions are creating all sorts of volatility. 

As we have been wishing all of our friends who are in the path of these wild hurricanes: Stay safe!