When interest rates climb, investors should pay closer attention to the sectors they own
Think of investment sectors as neighbourhoods. If you own the best house in the worst neighbourhood, the market will assign a discount on your home’s value. Own the worst house in the best neighbourhood and you’ll enjoy a premium valuation. That’s how Barometer Capital describes its approach to investing, and investors may want to follow suit, especially if your portfolio lives in the financial district.
“The vast majority of your return comes from being in the right sector,” says Diana Avigdor, vice-president head of trading and portfolio manager at Barometer Capital, a Toronto-based wealth management firm. With interest rates climbing in the U.S. this is an important time for investors to make sure they understand which neighbourhoods they’re in.
The current rise in rates in the U.S. Is more about a normalization, after a lot of intervention to boost the economy. It’s not about an expected surge in inflation. Regardless….