Canada is in a “sweet spot” but don’t expect the same returns in 2022

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    Massey added, “I would suggest that Canada look very competitive with the rest of the world within the next six months and that the temporary effects of inflation should subside.”

    Given the central bank and inflation outlook, HSBC GAM has protected interest rate risk in its allocation to fixed income securities. In terms of the quality of its portfolios, it is “right at the top” after taking that step at the start of the pandemic. Massey believes there is plenty of room for high quality corporate bonds versus government bonds, while interest rate risk is covered by a shorter duration curve.

    With 52-week highs in a number of different markets in developed economies, Canada thrives on this expansionary period of the economy. The TSX Composite is heavily weighted on cyclicals, including energy, materials and financials, and has done well this year. But Massey warned investors, reminding investors that stock markets should look to the future and dampen expectations for 2022.

    He said, “We have a dividend strategy with Canadian companies that we operate in-house and that have returned over 25% year-to-date. That is a very external absolute return. We aim to pay dividends of 4% and 5% plus a small return on market, so maybe a return of 7% for this type of strategy, and we’ve been over 25% since the start of the year!

    “While we’ve been through the COVID crisis and looking the other side, we’ve seen tremendous gains in stock performance. While we believe stocks are still the place to be, we need to dampen those expectations going forward as we don’t think absolute returns will be that high.

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