A WELCOME CHANGE IN WASHINGTON
In the United States, the Democrats now control the White House, the Senate, and the House of Representatives. This massive shift in American governance will simultaneously bring much-needed stability to the country and a dose of uncertainty. Normally when a Democratic president takes office, Wall Street pushes pause.
But nothing about right now is normal.
Over the past few weeks, investors everywhere have been pouring money into the market on risky money-losing businesses like Airbnb and DoorDash, inflating forward-thinking companies like Tesla, and fuelling Bitcoin rallies not seen since 2018. And all of this during the worst pandemic in 100 years.
VALUATIONS AND VOLATILITY
Current investors are bullish. How bullish? If we look at long-term price-to-earnings ratios, the only comparable is the ‘dot-com bubble’ of the early 2000s. We’re also seeing bond prices climb to a comical height that essentially ensures a loss of any purchasing power to their holders. Generally, economist would agree that the market is nearing the end of its upward run. However, with vaccines hitting pharmacies and inoculation numbers climbing, many experts maintain a positive outlook.
Dubravko Lakos-Bujas is the chief U.S. equities strategist at J.P. Morgan Securities. He says U.S. stocks will surge 20% in 2021, and investors will enjoy “market nirvana,” thanks to vaccines, low interest rates and political gridlock.
On the other side, we have Michael Hartnett, chief investment strategist at Bank of America. He worries fund managers’ bullishness and the break-neck speed with which wealthy institutions are snapping up riskier assets, such as commodities and stocks, is contributing to a tipping point. Hartnett continues that when a bullish attitude is this prominent, that’s the preverbal canary in the coalmine for investors to get out.
EYE ON INFLATION
In an effort to mitigate the wide-reaching economic impact of lockdowns, the federal government injected millions of dollars into Canadian households and companies. However, months later, there’s a chance this could be problematic. Certain companies were able to pivot and for those Canadians that kept their jobs, this became a forced savings plan of sorts. If those individuals and corporations decide to start spending that cash all at once, the results could be unfavourable. This swift increase in demand on the fragile, recovering economy could prove too much and force the inflation wheel to start spinning like a top.
MITIGATING INVESTMENT MEASURES
With an unpredictable stock and bond market, a potential loss of purchasing power, and basement dwelling interest rates, the options to generate a return on your investment are slim. But not non-existent. Dorr Capital specializes in alternative investment opportunities. They offer tax minimization strategies like RRSPs, TFSAs, and RIFs, and specialize in a particular breed of real estate investing ideally suited for the new work-from-home reality. The recent population growth in Barrie, Vaughan, and Richmond Hill has translated to a significant growth in Dorr’s real estate investment assets and staff. Explore a more concrete form of investing and build a market-proof portfolio.
Dorr Capital is a boutique mortgage investment corporation specializing in land and construction loans in the GTA. www.dorrcapital.com 416-484-9747.
Update – June 29/2021
We have launched RealAlt Investments – a Mortgage Fund Trust, licensed under the Exempt Market Dealer, investing in Land & Construction development, building communities in Ontario. For more information please visit this web page on our site.