Debt represents risks for Canada
Duncan Presant - Sep 20, 2023
World economies have been operating under duress for several years. The uncertainty fueled by the spread of COVID-19 led to the shuttering of vast swaths of the global economy in 2020.
Debt represents risks for Canada
August 2023
By Richard J. Wylie, MA, CFA
Vice-President, Investment Strategy
Assante Wealth Management
World economies have been operating under duress for several years. The uncertainty fueled by the spread of COVID-19 led to the shuttering of vast swaths of the global economy in 2020. Subsequently, uneven reopening caused supply chain disruptions in many sectors and across borders. Over the past four years, unparalleled monetary stimulus has given rise to inflationary pressures, surging from near-zero to multi-decade highs. As a result, efforts to cool these inflationary fires have seen interest rates spike higher to similar multi-decade highs. Even though the issue of higher interest rates had retreated into the background for an extended period, the economic and market risks associated with them are now being recognized once again, especially here at home. The markets’ perception of these risks for individuals, businesses and governments will dictate prices and returns, as they always have. Currently, Canada might not seem much different from other industrialized nations. However, the governments and individuals who refrain from increasing their debt also minimize their risk. Long-term investors likely have a different level of comfort with debt as it can be an advantageous investing tool. At the same time, one of the key advantages of professional advice is the opportunity for open discussion around its risks and benefits. This ensures investors have a far better awareness and understanding of their own balance sheets.