Guaranteed Interest Rates vs. Stock Market Risk

October 11th, 2023 / Insights from James Whitehouse, Senior Wealth Advisor & Portfolio Manager

Hi to all,

Here we are in our beautiful autumn season, a time of year I always enjoy.

We have recently come across an interesting article discussing the value of current 5.5% GICs in relation to stock market risk.

The markets decreased by approximately 21% from December 2021 to September 2022. Currently the US and Canadian markets are still approximately 8% lower than the December 2021 high water mark.

During this market decline, we saw interest rates on 1-year GICs rise from 1.2% to a current rate of *5.84%.

Having raised a large amount of cash from rebalancing profitable equity positions in early 2022, we have been steadily building 3-year GIC ladders as part of most client portfolios. (Ladder is a term used for buying 1-, 2- and 3-year GICs.)  

With short-term cash earning approximately 5%, and rotating GIC maturities over the next 3 years, clients are well positioned to take advantage of higher rates, should they materialize. Portfolios are also well positioned to take advantage of any market opportunities that may become available.

Most portfolios also continue to have equity positions in strong dividend paying companies as good long-term investments.

Enjoy our beautiful fall.

 

James Whitehouse

Senior Wealth Advisor & Portfolio Manager

Phone : 403-531-8461
Email : james.whitehouse@nbc.ca

National Bank Financial - Wealth Management (NBFWM) is a division of National Bank Financial Inc. (NBF), as well as a trademark owned by National Bank of Canada (NBC) that is used under license by NBF. NBF is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF), and is a wholly-owned subsidiary of NBC, a public company listed on the Toronto Stock Exchange (TSX: NA).

This rate is is for illustration purposes only, and was the posted rate for a specific GIC issuer and specific maturity date at the time this blog was written and is not guaranteed, as rates change frequently. Please contact your advisor to obtain the current rates and maturities, as well as other pertinent GIC information, including any risk factors. 

Contact us

Get contact information for our team members and find out where our offices are.