Three things that could cause you financial harm in the near future.

Many are wondering just how sustainable the current environment is as markets continue to defy gravity.

There is no doubt a lot of momentum is being fuelled by loose central bank monetary policy inflating asset prices at the same time fiscal deficits are setting new records in an attempt to slow the exploding wealth gap between the wealthy and the poor. Yet such monetary and fiscal policy as well as government regulation could lead to some unintended risky consequences if we’re not careful, especially should COVID-19’S fourth wave really take root.

Here, then, are three risks that could cause some harm to your financial position if they aren’t appropriately managed.

1. HOUSING

Canada is among the world’s most expensive places to live. Having spent my summer vacation in Squamish and Whistler, B.C., I can certainly understand the attraction to certain areas such as the West Coast, given its great weather and jaw-dropping beauty. That said, entering such housing markets could be a dangerous trade if not careful.

We came across a great example of this via Twitter and Reddit. A couple apparently decided to move to the suburbs, thinking that working from home would be a permanent option for them.

Upon learning it wasn’t, they’re now stuck with a home they overpaid for and can’t sell without taking a loss, or face a sizable commute if they stay.

You can’t blame them for making such a move.

Average housing prices are 10 to 15 times income levels in cities such as Vancouver and Toronto, so more leverage needs to be deployed there than in cities like Calgary, where it is only four to five times. Should interest rates rise, the carrying costs could prove devastating to those who bought on the margin in pricier cities.

On top of that, there’s the potential for significantly more expensive home-heating and electricity costs due to a carbon tax that is about to rocket higher and the Liberal government’s plans to get rid of new internal combustion engines by 2035, even though it hasn’t provided any guidance on the required infrastructure build.

2. LONG-TERM BONDS AND THE CANADIAN DOLLAR

Yields have recently been dropping on longer-term bonds, helping reduce some of the losses experienced earlier this year.

A year ago, 20-year United States Treasuries were yielding 1.15 per cent. They peaked at 2.36 per cent in March and are currently at 1.9 per cent.

These moves don’t seem like much, but take a look at the ishares 20+ Year Treasury Bond ETF, which lost nearly 20 per cent when yields rose from August last year to March 2021, and has since gained 10 per cent.

This is a lot of volatility for a fixed-income allocation. Until some of the macro settles out, we prefer to stay shorter term in duration.

We also think there is a serious idiosyncratic risk underlying the Canadian dollar, given the federal government’s ongoing lack of fiscal prudence and an economy that has transformed itself over the past decade into one primarily driven by real estate speculation.

Meanwhile, the U.S. is begging the Organization of the Petroleum Exporting Countries for more oil production, while Canada, unfortunately, is no longer able to help since the Joe Biden administration shut down the Keystone XL pipeline extension.

We wonder if such a shift means there will be a ceiling to the upside influence oil has on the loonie, thus ending its historical relationship.

3. CLEANTECH/ ENERGY

We think all the hype around renewables, cleantech and the resulting valuations is akin to the 2000 dot-com bubble. For example, one large institutional manager recently told us that the demand for certain wind projects is so great that they’ve been bid up to yield a paltry internal rate of return of two to five per cent, which could easily turn negative should there be cost overruns.

Then you have electric-vehicle companies such as Nio Inc. It doesn’t sell any cars in the U.S. and only delivered 21,896 vehicles globally in Q2, yet its market value tops US$60 billion, making it larger than Ford Motor Co.

We wonder what these sales and resulting valuations would look like if one stripped out the EV subsidies provided by local governments. Those touting the clean-energy, save-the-world narrative are making a lot of money from it, but may actually be harming the environment.

For example, Telsa Inc.’s new plant in Germany involved clear-cutting enough trees to fill 100 soccer fields early last year, and it also constructed the facility right on top of the water table in the small town of Gruenheide.

I also recently read that Bill Gates, Jeff Bezos and Michael Bloomberg are teaming up to form a joint venture to explore and potentially exploit rare natural resources on pristine land in Greenland in order to meet the expected demand for EV batteries.

In conclusion, one needs to be very careful when it comes to building a better future, especially when governments and central banks get involved. The short game may drive their decisions, but don’t let it drive yours, otherwise you may be unintentionally connecting yourself to their longer-term consequences.

Financial Post Martin Pelletier, CFA, is a portfolio manager at Wellington-altus Private Counsel Inc. (formerly Trivest Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.