There's no place like home! Is it time to invest in Canada?

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Oil is down to roughly half of what it was last year.  The bank of Canada has cut rates and is holding these low rates. We just elected a new government which is largely unproven.  The reasons to avoid Canada are numerous and somewhat obvious at this point. Canadians are famous for allocating too much of their investment dollars here at home.  Its likely been a drag on your portfolio if you followed this for the past 4-5 years as there have been more productive places to invest over that time. But here are a couple reasons that you might want to take another look north of the 49th when it’s time to put some money to work this fall.

 

Election time:  You might read this and if you have read my other piece explaining why the government doesn’t really matter; you might think that I’ve disregarded my own advice. But the election I refer to is the US presidential election and it’s about to go into full swing. From a purely historical perspective this is a great time for the US markets, and no surprise this means it’s a great time for their largest trading partner.


Coupled with the first point, the Canadian dollar is at what is basically an eleven year low against the USD.  This means increased exports and should benefit the manufacturing sector.  This also gives some respite to oil producers as they pay expenses in Canadian dollars and sell their product for the higher valued US dollar. Increased demand in the US is going to be a good thing for Canada, even more impactful with the value of the dollar.


A Democrat in the White House.  I know, this has been the case since 2008, so what’s the difference? Well there isn’t one, except this is the end of his term and they will want to get re-elected. The Democrats have shown a significant positive impact on the markets and economy in the US when they’re in power, so this final year of the presidency could be a little more pronounced.


Canada is just coming out of a recession: We could already be out, and that bodes well for our markets. It might not feel like it if you work in the oil and gas sector as depressed prices there are slow to recover.  As usual they took the elevator down and now have to take the stairs back up.  That said though, we should see more signs of this recovery in the coming months, but we cannot confirm that until we are already out of the woods!


The Liberals economic plan.  OK, the government is almost meaningless when it comes to the economy, right? I can’t go back on my thoughts here.  That said, the Liberals are going to spend a lot of money on infrastructure and that will no doubt help to fuel construction and will stimulate the economy.  If I’m correct that we are just out of recession, this will mean they’re adding fuel to the fire.  It won’t mean that we go from recession to over-heated immediately, but we’ll be growing at a nice clip as those projects become implemented.

 

So there you have it.  Those are five good reasons why investing in Canada is likely prudent at this point. I wouldn’t likely take every dollar I have abroad and repatriate it, but I wouldn’t ignore this either.  This is a discussion best had with your investment advisor, and with a good review of the risks and of course your investment goals at the same time.  While I could be entirely wrong here, I think that a fairly strong case can be made to take a look at this point.