Last week the Bank of Canada raised interest rates a full 1%. I have to admit, I didn’t think the raise would be that big – it was the greatest single day interest rate increase since 1997.

 

As of Friday, the Canadian Prime Rate was 4.70%. Last July, it was 2.45%.

 

In a previous newsletter, I alluded to how this would affect companies and, in turn, their stock prices. Today though, let’s consider the impact for a personal borrower.

 

If you’re a home buyer looking at a $500,000 home and needing a $400,000 mortgage, your monthly payment today is $2,259/month. Assuming the same 25 year timeline, this time last year the payment would only be $1,782, a difference of $477/month.

 

I wanted to show this simple exercise to get you thinking about how rising rates will impact consumer borrowing and investing. Publicly listed stocks are faced with the same challenges and it will be another impediment to growth (coupled with worker shortages, inflation, and rising taxes).

 

My job will be to position you in the companies, sectors, and commodities best positioned for this environment moving forward. From all indications, the Central Banks won’t be bailing out our portfolios like they did during the COVID-19 crisis, so we’ll need to be ready to do it ourselves.

 

Last week was light again in trading. I sold 2 smaller positions in Micron and Disney to raise a little more cash. I also switched one precious metals ETF for another to trigger a capital loss to apply to gains we made since Jan 1. This week will be another busy one with a further onslaught of earnings announcements.

 

Go enjoy summer, I got this..