Sometimes timing is everything when it comes to investing, such is the case in this unique period of transition during the financial cycle. The Bank of Canada made the decision to hold interest rates steady creating a market sentiment that is unsure to say the least.
There are so many opinions of where the markets are heading and this article is my interpretation to those who want to hear it. Based upon analysis of capital, real estate and mortgage markets I have concluded the following rationale in my future investment decisions.
Stay Liquid in times of Uncertainty
The world economy is having many issues of uncertainty in this segment of time. Main factors that I see affecting Canadians include but not limited to Donald Trump and his antics that are affecting the capital markets, the recent interest rate hikes, crazy Pot stocks, new policies on mortgage lending criteria and a correction from the 30 point increase in real estate values in 2017. The Bank of Canada has put a bottle neck on disposable income by changing many policies to slow down the economy. But sometimes you don’t need a shotgun to kill a mouse… “Too much all at once!” is all I have to say! Until there are indicators that the wise gurus of the country’s finance have things under control, I would suggest keeping funds as liquid as possible during these times.
Seeking Opportunities in Times of Turmoil
In times like these, one would assume doom and gloom and lack of opportunity. But every cloud has its silver lining and in these periods of capital scarcity, pockets of fortune are visible for investors that know how to see things in the correct perspective. For example the emergence of private lending opportunities in the mortgage market due to the ridiculous bank stress test policies. Since the new policy has instantly disqualified many individuals that have been credit worthy with stricter TDS ratios, there are decent people looking for funds. Therein lies good opportunities for a good return to investment tied to firm security via of title of land. This is just one of the ways you can capitalize when irrational numbers take precedence over the overall big picture. I believe thinking on a marco perspective of human analysis will result in better decisions over the long run when dealing with risk assessment.
Watching for the Turn of the Tide
Like pulling dandelions from the grass, in order to solve the problem you need to get to the root of the issue. The biggest factor that has resulted in most damage on the mortgage market and real estate industry is the infamous “200 basis point stress test.” There is a chorus of industries publicly asking the Government to take a closer look at the adverse effects of the policy. Until this issue is adjusted the markets are going to reflect the same sentiment as the people. The average middle class are currently in dire straights, an article I read lately sites “Canadians are $200 away from insolvency.” Long story short, wait for news of the mortgage stress test to change… why, because it has to or worse things will continue to happen…
As time passes and I learn more and more about how to see things more on a macro scale. It’s certainly changed my perspective on events and understanding multiple viewpoints upon challenging situations. I don’t sweat the small things as much, roll with the punches and watch for silver linings! Until next time… Stay liquid, look out for butterflies in the swamps and watch out for a signs of spring!