July 2022 update - Jumbo rate hikes and it's not over

Last week, the Bank of Canada surprised everyone by raising its benchmark interest rate by a full percentage point, the largest single hike since the late 1990s. With 4 total hikes since the start of the year, the rate is now at 2.50% whereas it was 0.25% previously. The effects on the economy and Canadians in general are mixed. Banks and other financial institutions will be adjusting their various interest rates for both the loans they make and the amount they pay you for borrowing. Credit cards and most other loans will be much more expensive. If you have a mortgage with a variable rate, you'll be paying much more on that shortly. Higher interest rates will also cool the housing market. So if you are looking to sell your home or borrow from your home equity line, you're likely to find that your home's value has stagnated or even declined. The Bank has no choice given that inflation is so high, projected to hit 8% before the end of the year, and so it will likely continue to raise rates for the next few months, probably totaling an additional 1 percentage point. Things in the U.S. are not better, as inflation there hit 9% annualized, and the Federal Reserve will also continue to raise its rate. However, if you're looking to invest, banks GICs and savings accounts offer a much better yield than before, so there are some positives. All things considered, this will certainly be a tough time for everyone.

Meanwhile, there are no changes to the sample portfolios, but performance for the individual ETFs has been added so you can get a better sense of their performance and the recommendations.

Sample portfolio for a Canadian investor

Asset class	ETF ticker	Weight	Performance July 1-15	Performance June
Canadian stocks	VCN	2.25%	-2.3%	-8.6%
US stocks	VUN	11.25%	3.2%	-6.9%
Foreign stocks	VIU	9.00%	-0.7%	-8.1%
US corporate bonds	ZSU	0.00%	0.2%	-1.4%
Canadian corporate bonds	XSH	0.00%	0.1%	-0.8%
Global high yield bonds	MHYB	0.00%	0.4%	-4.7%
Emerging markets bonds	ZEF	0.00%	-0.8%	-3.9%
Global real estate	TGRE	2.50%	0.2%	-6.0%
Canadian mortgage-backed bonds	ZMBS	30.00%	0.1%	-0.7%
Canadian government bonds	CLF	15.00%	0.2%	-0.7
Global government bonds	XGGB	15.00%	0.6%	-1.2%
Gold	KILO	15.00%	-5.8%	-1.6%

Sample portfolio for a US investor

Asset class	ETF ticker	Weight	Performance July 1-15	Performance June
US stocks	SCHX	11.25%	2.1%	-8.3%
Non-US stocks	SCHF	11.25%	-1.8%	-9.7%
US corporate bonds	SPIB	0.00%	0.5%	-2.0%
Non-US corporate bonds	PICB	0.00%	-1.2%	-5.8%
US high yield bonds	SPHY	0.00%	1.8%	-6.7%
Non-US high yield bonds	IHY	0.00%	-1.8%	-7.5%
Emerging markets bonds	VWOB	0.00%	-1.8%	-6.3%
Global real estate	REET	2.50%	0.1%	-8.2%
US mortgage-backed bonds	MBB	30.00%	0.8%	-1.6%
US government bonds	VGSH	15.00%	-0.2%	-0.6%
Non-US government bonds	BWZ	15.00%	-2.3%	-3.7%
Gold	GLDM	15.00%	-6.1%	-1.2%