While Richardson said his team has always placed maximum emphasis on earnings growth rates for stocks, current circumstances are placing them more focused on value. With high interest rates on the horizon, there is a good chance of adding great companies to a portfolio at reasonable or potentially bargain-basement valuations.
This is a straight out page from the Value Investors Playbook. As rates rise and stocks fall, many investors are likely to succumb to fears. Those who may be greedy while others run for the door, therefore, have a chance to break into companies with long records of consistent and predictable earnings growth, as well as reasonable expectations of doing so.
“Higher interest rates can lower valuations,” Richardson said. “With many companies delivering strong earnings, this can lead to better prices for entry into the stocks of great companies.”
One area of alternative investment Harbourfront is eyeing is private loans, which include private mortgages and commercial loans. Richardson said most private lenders offer loans with relatively short terms and relatively high rates. He said most of the mortgages he issued are floating-rate loans, meaning investors get higher returns if interest rates rise.
With inflation proving less tentative than the central bank’s policymakers, he said it is an opportune time for investors to rethink their financial plans. Assuming that inflation continues, it will cause the cost of retirement and the cost of living to rise. For pre-retirees, this is less money for their nest egg, and possibly a delay of one to two years in their retirement.