Equities "the place to be"

AGF's Peter Frost warns of fixed-income headwind.

Sonita Horvitch 17 July, 2013 | 6:00PM

Peter Frost, vice-president and portfolio manager at AGF Investments Inc., says that returns from equities could be more muted in the second half of the year, but they will still likely outperform bonds.

Risks to the equity market in the second half of the year include, he says, the German elections in September and the possibility of a changing of the guard at the U.S. Federal Reserve Board. Still, he says, "equities are the place to be in this environment."

For the first time in many years, the bond market "is facing the headwind of rising interest rates," says Frost. The fixed-income market is anticipating a reduction in the US$85-billion-a-month bond purchases by the Federal Reserve, known as quantitative easing. "Bond markets on both sides of the border sold off sharply recently, and high-profile equity-income securities, which are also interest-sensitive, took a beating."

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Sonita Horvitch

Sonita Horvitch