CIBC Asset Management Perspectives CENTRAL BANKS PASS THE BATON

Central banks have done all they can for economic stimulus. The time has come to hand over policy leadership to governments. This is obviously easier said than done, given the political tensions in many regions. Political risks will be particularly elevated over the coming months with the U.S. presidential election. In addition, moving into 2017, many European countries will also be holding elections. This substantially delays the potential use of fiscal policy to support economic activity.

Key Insights:

Fixed Income vs. Equity - Since early summer, we have adopted a more neutral stance between equity and fixed income. However, bonds are unlikely to rally much in the case of a "risk-off" equity correction and will likely provide a lower degree of portfolio diversification than in the past.

Equity - Even after a recent period of outperformance, emerging Asian equity markets remain attractively valued and our preferred global equity region.

Fixed Income - Canadian Government bond prices will remain close to unchanged, while corporate bonds will continue to outperform.

Currencies - The Canadian dollar will likely lose ground not only against the U.S. dollar, but against other currencies in our trading universe.

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