Canada’s market lacklustre performance is frustrating, but temporary
Published on September 8, 2017
Last week, Statistics Canada released data that showed the Canadian economy surging to 4.5% growth in the second quarter — the largest growth spurt in six years. A day later, the Canadian dollar broke the 81-cent barrier against the US dollar. Meanwhile, the U.S. Bureau of Statistics released disappointing job numbers that fell well below expectations.

Canada’s growth has consistently exceeded 3% over the course of the year. The loonie has gained 10% in the same time frame. Yet according to the Morgan Stanley Capital International (MSCI) global index performance, Canada is positioned at or near the bottom in year-to-date performance.

How can this be when Canada is leading the G7 in economic growth? When Canada’s Big Six banks reported earnings that beat expectations and increased dividends? When Canada’s economic and political landscape remains a haven of stability compared to the relative uncertainty in the US, the UK or other parts of Europe?

It’s a frustrating conundrum.

Part of it may relate to the feverish housing markets in Canada’s major urban centres — specifically, the Greater Toronto Area and the Greater Vancouver Area. When I was in the US in July, the Americans I spoke with expressed concerns of Canada’s imminent housing bubble and the 2008-like collapse that may be around the corner. Part of it may also have to do with the world’s persistent perception that Canada is still a petro country. With oil down below US$50 per barrel, the view is that our economy must be suffering as a result. And yet, the loonie continues to rise.

The reality is that Canada’s economy is much better than it is being portrayed on the world stage. It’s a frustrating circumstance, but it is only a short-term issue. Over the long term, as Canada continues to post consistently strong numbers, perceptions will adjust and stocks will adjust.

Canadian bank stocks and patience are virtues

If there’s somewhere to look for a vote of confidence, it would be the senior bank executives who choose to invest their retirement savings into Canadian banks. Retired TD Wealth chief portfolio strategist Robert Gorman is one such example. In an interview with the Globe & Mail, he said that when given the opportunity, he exercised long-term options on TD shares and held them over the long term in his portfolio.

When asked what his best and worst investments were, he said that his worst investment was in Canadian Natural Resources, which he sold at a loss during the oil crisis in the 1980s, only to see it rebound after that. His best investment has been in his TD stock. But he said that both his best and worst investments demonstrated the benefits of patience.

Mr. Gorman’s strategy reaffirms the importance of Canada’s bank stocks as the pillars of the equity market. And that although market volatility can be frustrating from time to time, over the long term, they’re a great investment.

It’s a privilege to call Canada home

I spent some holiday time in Spain this summer. This included spending several days in Barcelona, wandering along Las Ramblas avenue and taking in the sights. To my good fortune, I left the city just three days before the terrorist attack in the very square I stood in.

Yet even when I was there, when no one could have foreseen the attack that would come days later, there was a heavy security presence. Soldiers stood on almost every corner armed with machine guns. This is something that Europeans live with on a daily basis. It forms part of their everyday lives.

We forget sometimes how lucky we are not to think that armed soldiers standing at the corners of Nathan Phillips Square is normal. We take for granted certain freedoms that the rest of the world don’t have.

I love Europe, but I was more grateful than usual to be returning home to Canada. I am thankful to those who knew I was away and reached out to me by text or email. And I am thankful to be Canadian and to live in one of the world’s best countries.

Sincerely,

Stephen Sisokin

President

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