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We have ourselves a bull market in the unlikeliest of places – guaranteed investment certificates.

Worn down by bad news both in and out of the financial world, investors are turning to GICs for a combination of much-improved interest rates and safety. At GIC Wealth Management in Toronto, the number of GIC transactions lately is close to double the level of last year.

“We have a war going on in Europe, there’s a potential recession and inflation is at record highs,” said Kevin Rotenberg, a principal at GIC Wealth. “People see 4 per cent on five-year money with zero risk and they can accept that.”

Money flows into GICs are also up substantially at Conservative Investors’ Services in Toronto and Victoria-based GICdirect.com. Stocks, particularly those in speculative sectors, had a great run in the past couple of years. Now, GICs are having their moment.

Part of the appeal of GICs is a jump in rates in the past 12 months. Mr. Rotenberg said this week that rates on one- and three-year certificates at GIC Wealth have risen to 3.58 per cent and 4.05 per cent from 1.05 per cent and 1.50 per cent, respectively.

“It used to be that any time we were over 3 per cent, our volumes would start to tick up,” he said. “Now, we’re over 4 per cent, which is pretty huge.”

Late this week, the Canadian High Interest Savings Bank Accounts website showed top rates of 3.15 per cent for one year, 4.05 for three years and 4.15 for five years. Rates are rising steadily at alternative banks, and the big banks are more competitive than usual (but still far from the best on rates).

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GIC rates are well below the most recent inflation rate of 6.7 per cent. But where can you get a return of 6.7 per cent or better these days? Bonds, which investors hold to stabilize their portfolio and provide some income, have been hammered this year by rising interest rates. Canadian stocks have mostly held their ground this year, but the high-flying S&P 500 and Nasdaq have fallen hard.

All of these developments and others such as high inflation and oil prices contribute to what Mark Walhout, a financial planner and investment fund representative with Investia Financial Services Inc., calls “volatility fatigue.” People are tired of drama in their investments, and everywhere else.

“Aside from just inflation and financial markets and the uncertainty with what’s going on in Europe with the war, I would say just people are kind of nervous in a way that I haven’t seen,” Mr. Walhout said.

Other signs of volatility fatigue can be seen in the flow of money into exchange-traded funds, a cheap and convenient way for investors of all ages to build diversified portfolios. A little more than $1.5-billion was invested in ETFs in April, compared with $13.5-billion in the first three months of the year. A sign of the fading appetite for risk: Funds that hold or track cryptocurrencies had their worst month since this category launched in February, 2021.

ETF companies made a lot of money selling products to satisfy the hunger for investing in technology and other sectors in the past two years, and they’re hoping to make more. BlackRock Canada’s iShares ETF division recently announced the listing of four “megatrend” funds on the Toronto Stock Exchange. These funds, similar to products already available to U.S. investors, cover sectors such as genomics, cybersecurity and clean energy.

Losses in the U.S.-listed megatrend funds for the year to date highlight the stock market’s decline in the past several months. GICs will never match the return of funds like these when they’re riding a wave, but they do provide zero risk of the kind of losses seen lately in both stocks and bonds.

Depending on the issuer, deposits in GICs are protected by Canada Deposit Insurance Corp. or provincial credit union deposit insurance plans. Mind the limits – CDIC protects up to $100,000 in principal and interest per eligible account, while credit unions in some provinces offer unlimited coverage.

The brutal stock market volatility of this past week highlights the safety factor with GICs. But GIC dealers say it’s rates that are bringing in clients. “There is clearly a pent-up demand from savers/investors that want GICs at a reasonable rate of return,” Bill Ritchie, president and chief executive of GICdirect.com, said by e-mail. The dollar amount of GICs sold by the company was up 132 per cent in April compared with the same month last year, while the number of GIC transactions was up 40 per cent.

Client activity at Conservative Investors’ Services offers some insights on how people are using GICs right now. Owner Mary Rygiel says clients are putting new money into GICs rather than reallocating money by selling what they already own.

They also show a preference for a three-year ladder, which means equal investments in terms of one through three years. For now, there’s little or no incentive in the form of higher rates to lock in money for five years. A rationale for buying five-year GICs anyway is that you see rates peaking soon and heading back down again.

The volatility we’ve seen lately in financial markets seems likely to continue until inflation is tamed and rates plateau, which means investor interest in GICs could increase further. At GIC Wealth Management, demand from investors is already strong enough that they’re considering adding staff to help their office co-ordinator process applications. “She’s a little bit inundated,” Mr. Rotenberg said.

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