Purpose Investments’ top executive says it’s still uncertain if a significant recession will occur or just a mild economic slowdown, but he believes elevated interest rates could take a toll. 

Som Seif, the CEO of Purpose Investments, said in an interview with BNN Bloomberg Monday that people are “amazed” regarding current economic conditions. He said consumers were still spending during the first half of the year but may start tightening budgets. As a result, he said the question becomes if the economy has reached an inflection point.

“I fundamentally believe that it's pretty impossible for the Fed (U.S. Federal Reserve) or the Bank of Canada to raise rates by 400 basis points plus and not break something,” Seif said. 

“So the question is, what does it break? How much does it break? And I think we're going to see some of that information on mortgages and consumer spending in the next couple of quarters.” 

Seif said it is “still to be determined’ if a mild slowdown or recession will occur as the labour market is still robust despite some levels of unemployment.

In the current environment, Seif said he doesn’t see the bond market as compelling and many investors are choosing cash. He said this is due to the potential risks from a recession, geopolitical issues, as well as interest rates and inflation.

As a result, Seif highlighted that many are choosing not to take the risk and instead “sitting in five per cent cash and saying: “I’m happy.”