Investment Q&A

We tend not to let interest rates become the key factor in an investment thesis in a certain theme or sector. These are interest rate-sensitive industries and the interest rate movement in the near term could be a near-term headwind or tailwind for these companies. At the end of the day, it is the fundamentals of a business that will really dictate the investment outcome. However, we think as soon as the trend in interest rates is favourable (declining), these companies could do better. Interest rates do have a direct impact on earnings due to their high debt level, but mostly it is investment sentiment that may shift more positively. Their dividends become more valuable as other alternatives decline in yield. We doubt we get back to 2021 interest rate levels, but Canada has already made the first move down.  We think these stocks may see more moves when rates drop by another 0.5% or 1%.