As we head into 2016, you should help clients stay calm and hedge their portfolios.
That’s because markets will continue to be volatile. And, we may be surprised by commodities markets and government policy moves, says a new report by Export Development Canada.
Not only will oil prices remain low, but investment in production is set to drop for a second consecutive year, according to the International Energy Agency. Further, sluggish growth across the country could lead the Bank of Canada to consider another rate cut—in a December Canadian Press article, CIBC Capital Markets economist Nick Exarhos says weak Q3 results undercut expectations that our economy had rebounded.
The good news is we’ll continue to see global growth in 2016, says chief economist Peter Hall in the EDC report. He notes world growth is expected to reach 3% this year and 3.6% in 2016. “Growth in the developed world is forecast to increase from 2% this year to 2.4% in 2016. [Meanwhile], emerging markets will post growth of 3.8% this year and 4.4% next year, [which means they’ll] continue to contribute a higher share of overall output.”
Overall, he explains, “Growth is back, but with a twist. […] The trick to surviving and thriving will be adept management of volatility. [And], given Canada’s strong structural position, [which is based on its] well-managed fiscal policy, solid financial institutions and a diverse export base, we are well positioned to take advantage of global opportunities.”
For its part, Canada’s real GDP is expected to rise by 1.5% next year, says Aubrey Basdeo, head of Fixed Income at BlackRock AM Canada, in a recent release. He also predicts the 10-year yield for a Government of Canada bond will be 1.8% in 2016.
The lesson? Prepare clients for turbulence and watch for investment opportunities abroad. And, don’t forget to factor in the impact of the new Liberal government’s policies and tax changes.
For more on the economy and for investment tips, read: