by Tulika Marathe
Plunging oil prices have slowed Canada’s economic growth enough to raise fears of another recession. So is it time for your clients to re-evaluate their portfolios?
It may still be too early to quantify the adverse economic and financial effects of the falling crude prices, but is now the time to shuffle your clients’ holdings?
“It’s already too late to do that,” said Adam Mayers, personal finance editor with the Toronto Star. “We’re already in a shallow recession. We’ve been seeing a steady decline in oil prices and a slowdown in the economy in the last two quarters. That’s why the Bank of Canada cut interest rates, in the hope of accumulating growth.”
When asked about investment opportunities at this time, Mayers said that there are always opportunities to invest, but that we should start to see a recovery towards the end of this year.
All is not lost, however. There still is scope for prudent investment in manufacturing if you’re up for the risk, or in other industries if you want to play it safe.
“Oil is a commodity that may not pick up value so quickly,” said Jason Castelli, VP portfolio manager at Raymond James. “We do want exposure, but not too much.” Be cautious of oil prices falling further, he advises, and focus on the high-quality manufacturing companies, like Suncor Energy and Imperial Oil, which can withstand the lower prices.
Other options also exist for those who want to play it safe. According to Castelli, you want to be investing in other industries, like healthcare, consumer staples – “anywhere really that is not resource-related”.
“These areas are much safer to focus on in case growth in the resource industry does not pick up,” he said, “though we do hope that growth will accumulate over the next quarter.”