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BMO Aggregate Bond Index ETF (ZAG)
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BMO Long Federal Bond Index ETF (ZFL)
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iShares Core Canadian Short Term Bond Index ETF (XSB)
Q: Do you think it is a good time to add bonds? It seems the most likely scenario's (slow growth with moderating inflation like now, or full blown recession) will be more favourable to bond investors than equity holders. What is the asset mix you would employ and do you favour longer bonds today? Thanks.
5i Research Answer:
We think the outlook for bonds is pretty good. After three years of declines (which has never happened, ever) we think rates are set to peak, and perhaps decline. Sentiment is very negative, and usually investors are less sensitive on bonds (looking only at cash flow and ability to pay). But after big losses on 'safe' investments, investors are 'angry' at bonds. Longer bonds have the most leverage to rates, but we would probably favour mid-term bonds right now, just in case inflation/rates take longer to roll over. We are not so sure the economy will be more favourable to bonds over stocks, however, as a peak in rates would be very good for stocks as well. But, if we do enter a recession, bonds will likely outperform in the short term.