The Globe and Mail reports in its Monday edition that the Bank of Canada is turning hawkish.
A Reuters dispatch to The Globe reports that the BOC signalled last week it could raise interest rates as soon as next year and cut the pace of bond purchases.
Investors say they have been adjusting portfolios for some time to prepare for a higher rates outlook.
Purpose Investments manager Greg Taylor says, "The fact that the Bank of Canada is now starting to take the foot off the gas, it is the first sign of what's going to happen and be the big story for the second half of the year."
He expects other central banks to follow the BOC's lead, making it more difficult for stock markets to rise later in 2021. Higher rates reduce the value of the future cash flows equities produce.
AGF Investments manager Mike Archibald says, "I am underweight (defensives) both on the expectation of better growth in the next 6-12 months as well as higher yields over time."
Rising bond yields crimp the appeal of the high dividends defensive stocks tend to pay.
The BOC expects Canada's economy to grow 6.5 per cent in 2021 and inflation to move over the coming months to the top of its 1-per-cent to 3-per-cent target range.
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