Investors are currently facing numerous economic headwinds as a potential recession looms. To help investors learn more about this economic turbulence so they can effectively protect their portfolios, the Financial Post spoke with Sightline Wealth Management for insight.
The first challenge is a return to high inflation, which reached its highest year-over-year rate in Canada this May in 40 years. Sightline Senior Investment Advisor Paul de Sousa says that this is an issue for investors since, “inflation lowers the purchasing power of our dollars, increases the cost of doing business, consumes discretionary income available for investment and acts as a de facto tax on both savings and a wide range of investments.”
In addition to inflation, de Sousa says that high levels of government debt are also poised to become an issue for investors since this is usually accompanied by higher taxes. “Excessive government debt also drives interest rates higher, increasing borrowing costs for the private sector and discouraging capital investment,” he adds.
Other factors that will likely impact investors’ portfolios explained by de Sousa in this article include rising central bank rates, quantitative tightening replacing quantitative easing and equities looking for price discovery. With all these headwinds converging together, de Sousa warns that investors may face a recession or stagflation in the near future.
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