Monetary Policy About Face - Earnings: POW, GWO, MLF, SLF, NPI
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The outlook for interest rates has changed considerably since the beginning of year, from for sure going higher to now heading lower.
This is in line with my expectations, except the extent and pace of the decline is larger and happening faster than anticipated. This is proving dizzying for markets, sensing the flight to the safety of bonds means the economy is weakening. Comments this week explain why rates have fallen further and faster than was forecast and how yield focused investors stand to gain from this.
Earnings reports this week include Power Corporation of Canada POW), Great-West Lifeco Inc.(GWO), Sun Life Inc. (SLF), Manulife (MFC) and Northland Power Corp. (NPI). With the exception of Northland Power Inc., the other four names are primarily in the insurance and investment management business. Revenue sources are from the sale of insurance and investment products and from investing funds held in reserves pending possible claims. Unlike the banks, who rely on earning a spread between deposit interest rates and lending rates, insurance companies with their substantial reserves invested in markets stand to do well when interest rates are low. They function as a no fee ETF with investment management services tossed in.
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