RE:RE:Stocks are an inflation hedge CHECKMATE77 wrote: Inflation = interest rate increase
look back to the 80's
No one invested in stocks when you could get over 10% a yr in a gic.
Many "investors" today are in the market only because a gic pays nothing.
the vast majority of money in the market ( retail) is with an older crowd. Ie boomers .
if said boomer could get a return on a gic that satisfies his/her cash needs they would leave the market in droves. That would mark a downdraft
Thats right. If you invested in a long term bond in 1981, you would trounce any future market returns from the S&P or any other index.
I personally think we will remain in a low interest rate environment for a very long time. I believe we are slowly getting back to pre-pandemic interest rates as the vaccine rollout begins. Remember that the stock market is always 3-6 months ahead so we are already looking into the summer and fall. In early 2020, risk free rates were just under 2% and we are already at about 1.54%
Also, with baby boomers retiring or retired, do you really think we can afford to pay 4-5% interest on a gic or Canada savings bond? I don't think so. It won't happen. The government have to pay off all of these debts and so interest rates will remain lower for a very long time. The interest rate must always be lower than the nominal growth rate of gdp for the country. With many people unemployed, this creates deflationary pressures which offsets the perceived risk of inflation.