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BMO Mid Corporate Bond Index ETF (ZCM)
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BMO Mid Provincial Bond Index ETF (ZMP)
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iShares U.S. High Yield Bond Index ETF (CAD-Hedged) (XHY)
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iShares 20+ Year Treasury Bond ETF (TLT)
1) If Trump causes crisis in the bond market which bond market and ETF would be least likely to be disrupted?
2) What is your take on the short and medium term risks to the bond market with Trumps economic non-strategy?
3) Is it a more reasoned decision to reduce bond exposures in favour of investing in shares of stable Canadian or European companies?
Thanks very much,
Dave
1) Of the list, ZMP would likely handle disruption best, being Canadian provincial obligations. 2) Short term risks are many, including tariffs, possible inflation and a flight from US assets. Longer term we are less concerned. If tariffs do stick (which is doubtful) the inflation impact should be one time temporary. A weak economy should lead to lower rates, helping the bond market longer term. Bond investors tend to look long term, and we would not expect a complete exit of US assets over time. The bond market will likely anticipate policy changes, in three and a half years, or sooner. 3) It is still a big shift to move from bonds to equities, as equities will not be immune to the same problems bonds may have. As we have seen, even the slightest piece of good news can change things dramatically. We would not make dramatic portfolio asset allocation changes, but would strive for continued asset and geographic diversity.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in XHY.