The bond bear market is now 37 months old, which is the longest bond bear market ever. If FTSE Canada bond universe index is down again in calendar 2023, it will also be the first time we experience three consecutive years of negative returns for bonds. As you can see from the chart below, the peak-to-trough drawdown of the FTSE Canada Universe Bond index is the largest in history.

 

 

 

The question we want to ask ourselves is what happens when bond bear markets come to an end? The chart below gives you a pretty good idea. As you can see, the two previous biggest drawdowns in 1981 and 1994, had a trailing three year annualized return of 22.78% and 13.87% respectively. Now, I'm not sure if this bond bear market is over but based on history it's potentially close. That is why we believe over-weighting bonds at this time will prove to be a good investment over the next three years. Time will tell!

 

 

I've also included a piece from our CIBC Economics team entitled "Will oil energize inflation again?".

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan

 

CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc.

The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.

 

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2023.

 

Milan Cacic is an Investment Advisor with CIBC Wood Gundy in Calgary. The views of Milan Cacic do not necessarily reflect those of CIBC World Markets Inc.