Q: Given current market conditions, what would be the major headwinds facing ZCS? It seems fairly resilient during Dow declines. Thanks.
5i Research Answer:
ZCS is a short-term corporate bonds ETF, and given the reduction in interest rates and rising expectations for corporations' ability to repay their loans, ZCS has been moving higher over the past year. If the Bank of Canada were to change its stance on interest rates in the coming year, to being more 'hawkish' (maintaining or increasing rates), this would put downward pressure on ZCS. A sudden change by the BoC would likely be a result of higher economic growth than expected, or a sudden resurgence in inflation.