In the 1980s, then British Prime Minister Margaret Thatcher liked to use the term “there is no alternative” when communicating her government’s economic policy. She used the phrase so frequently that people shortened it to an acronym, and thus “TINA” was born.
Today, investment prognosticators and the financial press are using TINA to describe the current investment climate. Gone are the days when investors could rely on bonds to produce stable returns that would exceed the rate of inflation. In the opinion of some, at present “there is no alternative” to equities if one hopes to achieve investment returns greater than 3%.
Are we really in a TINA market?
No doubt you’re asking yourself: is this line of thinking accurate? Are we really in a TINA market? There is some compelling evidence to support this belief:
- Bond yields are at their lowest rate in history
- Roughly two-thirds of government bonds are yielding less than 1%, with over 35% trading at negative yields to maturity Source: PCR Investment Call Featuring Myles Zyblock and Chief Economist Jean-François Perrault (Tuesday May 17, 2016)
- Invest in a 10-year Canadian bond, and after 10 years you will achieve a return of just 1% Source: PCR Investment Call Featuring Myles Zyblock and Chief Economist Jean-François Perrault (Tuesday May 17, 2016)
How long will this TINA market last?
No one knows for sure how long this TINA market will be the norm. Global growth has slowed, and has been forecasted to slowdown even more. Interest rates remain low at banks around the globe. As long as interest rates are low, bond rates will remain low too. Combine these factors with the stats mentioned above and it’s understandable why the sentiment among many market followers is that all investors can expect from bonds for the foreseeable future is low growth.
This blog post was prepared solely by Andrew Rempel who is a registered representative of HollisWealth® (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The views and opinions, including any recommendations, expressed in this blog post are those of Andrew Rempel alone and not those of HollisWealth.
® Registered trademark of The Bank of Nova Scotia, used under licence.