Mackenzie Minute: June 17, 2016
Paul Musson, Lead of the Mackenzie Ivy Team, questions the move by European central banks to buy corporate bonds and also looks at how a possible "Brexit" might impact investment markets.
Well, the first one is that the European central banks started buying corporate bonds. This is just sort of the next step in what we think is very reckless behaviour by central banks over a number of years, the last number of years, which has really been messing around with price discovery and really, we think, longer term destroying economic fundamentals. Shorter term has a benefit. Longer term we don't think is a very good thing at all. The other thing that's happening obviously is Brexit polls are starting to move in favour of Britain actually potentially leaving the European union.
The main event over the next two weeks obviously is Brexit. I mean, that's the big one. Nobody knows obviously what the outcome will be and, if they do decide to leave, what the potential consequences of that will be. But, shorter term, there could be some significant dislocations and uncertainty as the world, as the central banks have leveraged the world's balance sheet for a world of perfection for a road with no bumps. And, that's the trouble. You have a lot of debt and there's one bump unexpected. You don't know what could happen.
If there is Brexit, there's no question that our products will be impacted due to the uncertainty, but, we think to a much lesser degree than most other funds because they are very high-quality companies. Strong balance sheets, great competitive advantages and they operate globally multinationals. So shorter term, uncertainty. Longer term, we think it could present some good opportunities for not only our businesses but, for us, in terms of picking up some cheap stocks.