[MillerTime GFG]

Low interest rates have stuck around longer than originally anticipated, and show no immediate signs of changing, which is having investors change their strategies.

It wasn’t supposed to turn out like this. When central banks around the world cut rates after the recession, it was meant to be a temporary measure to help stimulate the global economy. By making lending cheaper, consumers, corporations and governments would be able to borrow money inexpensively and put those dollars back into the economy, whether by buying goods or investing in businesses. Once global growth started revving up again, rates would revert to levels investors had grown used to, in the mid-single digits.


While some of this stimulus has worked—it’s no coincidence that home prices in Canada have soared since rates fell in 2009—for the most part, it hasn’t played out the way the experts thought it would. Global growth is still too slow—the planet’s GDP is expected to grow by 2.4% this year, according to the World Bank, which is actually below its 2.8% growth in 2011. The gradual shrinkage of the working-age population in developed nations as well as China has so far failed to stoke inflation through wage increases. Some observers point the finger at labour-saving technology, others at the demographics of aging itself—seniors simply buy less stuff.


Central banks have backed themselves into a corner, says Juliette John, founder of Calgary-based Iris Asset Management. Economies are not expanding fast enough for them to raise interest rates, but the longer rates stay low, the less impact they’ll have on growth. “Low rates have become less and less effective as time has gone on,” she says. “We’ve got a situation where rates are not helping, and if they do raise them, then that will squash any fledgling momentum that there is.”

http://www.canadianbusiness.com/investing/the-low-interest-rates-forever-portfolio/?platform=hootsuite