Ironic – Don’t you think?
CEO Ali Dibadj and Portfolio Manager Aneet Chachra explain how Canadian and non-Canadian investors can both enhance their portfolio diversification by allocating more to each other’s markets.
2 minute read
- Canadian and U.S. equity markets are quite different from a sector, style factor, and performance perspective despite the close economic ties between the two countries.
- The remarkable negative correlation between the Canadian dollar and global equities can provide a natural hedging benefit to Canadians investing abroad.
- Both Canadian and American investors could potentially improve their portfolio by allocating more to each other’s markets.
Canada is unique. It’s the second-largest country (after Russia) by area, even as its population represents less than 0.5% of the world. But it’s also the ninth-largest economy, accounting for about 2% of global gross domestic product (GDP) and 3.5% of global equity market capitalization. Moreover, Canada enjoys abundant natural resources including energy, metals, and water.
Canada and the U.S. enjoy a close economic relationship. Unsurprisingly, Canada’s largest trading partner is the United States. But surprisingly, the U.S.’s largest trading partner is also Canada, with the U.S. trading more with Canada than it does with countries such as China and Mexico.
Equity securities are subject to risks including market risk. Returns will fluctuate in
response to issuer, political and economic developments.
Concentrated investments in a single sector, industry or region will be more susceptible to factors affecting that group and may be more volatile than less concentrated investments or the market as a whole.
Foreign securities are subject to additional risks including currency fluctuations, political and economic uncertainty, increased volatility, lower liquidity and differing financial and information reporting standards, all of which are magnified in emerging markets.
Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.
Dividend Yield is the weighted average dividend yield of the securities in the portfolio (including cash). The number is not intended to demonstrate income earned or distributions made by the portfolio.
Index investing is a passive investment strategy that seeks to replicate the returns of a benchmark index.
Price-to-Earnings (P/E) Ratio measures share price compared to earnings per share for a stock or stocks in a portfolio.
Price-to-Book (P/B) Ratio measures share price compared to book value per share for a stock or stocks in a portfolio.
Sharpe Ratio measures risk-adjusted performance using excess returns versus the “risk-free” rate and the volatility of those returns. A higher ratio means better return per unit of risk.
S&P 500® Index reflects U.S. large-cap equity performance and represents broad U.S. equity market performance.