Current Outlook

Updated May 8, 2023


The following strategies guide our advice to clients and are reflected in the positioning of the Founders Fund.

Higher interest rates, and therefore higher borrowing costs, are impacting businesses in numerous ways. Most directly, large capital expenditures are slowing and expenses are being cut. Consumers are feeling the pinch too. Like businesses, they aren’t spending as much on things they want and are looking for cheaper alternatives to things they need. This slowdown is what policy makers were hoping for to tame inflation. The impact on investors, however, remains uncertain.

Investors are finally earning a decent yield on cash and bonds. For example, the Steadyhand Savings Fund is yielding 4.7% before fees (as of May 5, 2023). This is much welcomed by investors accustomed to earning almost nothing on the more conservative parts of their portfolio. It’s important to note, however, that the yield remains below inflation. Investing only in fixed income means an erosion of purchasing power.

In the Founders Fund, we’re holding 31% in bonds, more than we have in past years but still below our target of 35%. We’ve also rebalanced our equity weight down closer to our target and recommend investors do the same. Equity prices have risen, and we expect stock market returns to be in line with historical averages.


The risk versus return trade-off for bonds has improved but returns are likely to come with higher volatility than investors have been accustomed to as yields react to changes in inflation and central bank activity. Over the next five years, we expect bonds to return between 3-5% per year, which translates to a 15-25% cumulative return.

Bonds remain an important tool for most clients. They can provide safety when stocks are volatile, and as such, are a diversifier for a balanced portfolio.

In the Founders Fund, we’ve maintained our below-target weight in bonds (31%) but have increased the allocation with the rise in yields. We continue to hold an above-target weighting in cash (9%), which provides some defence when interest rates are rising and gives the fund liquidity. Further, yields on short-term cash investments such as T-Bills have risen significantly over the past year, making the asset class more attractive.


Our outlook for 5-year stock market returns has increased to 6-8% per year (or 30-45% cumulative), which is in line with long-term equity returns. For context, we expected 4-6% at the beginning of 2022.

The Founders Fund has a 60% stock allocation, which is in line with the fund's long-term target. We started 2023 at 65% but rebalanced our weighting as the market rose.

Specific Advice

If you would like an assessment of your portfolio or help with developing an investment strategy, we encourage you to book a meeting with us. We provide clear-cut advice and can help better align your investments to your personal situation.

Founders Fund Asset Mix: May 8, 2023