The Globe and Mail reports in its Saturday edition that if stocks looked like the only game in town when central banks were promising to keep their key interest rates at ultralow levels, that is now changing.
The Globe's David Berman writes that the Bank of Canada announced last week that it could raise interest rates sooner than expected -- perhaps starting in the second half of 2022, overriding its previous projection of 2023 because of stronger-than-expected economic growth.
"The Bank of Canada made a U-turn this week, from extreme caution in January to borderline extreme optimism now," Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, said in a note.
Investors are now left wondering whether other central banks are about to make U-turns of their own, marking an eventual end to the extraordinary monetary stimulus of the past year.
Ultralow rates have supported higher equity valuations, and technology stocks in particular have thrived in the low-rate environment. Higher rates could weigh on equity valuations.
"Stocks look expensive on all metrics except relative to bonds," Savita Subramanian, equity and quant strategist at Bank of America, said recently in a note.
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