What's wrong with Canadian market?
What's wrong with Canadian market?
It would have sucked not to have owned US stocks over the last year, especially over the last month. I own a touch over 30%, and I wish I had more.
It would be easy to blame the lagging TSX performance on NAFTA angst, the Trump tax bill, and the strength of the Cdn$, but the TSX has been languishing for much longer than that. Hard to believe that the TSX was higher than the DOW for most of 2011. Now the spread is rapidly approaching 10,000 points.
I know we survived the 2008 recession better than the US and may have benefitted from resources around 2011, but while the Cdn$, and maybe even the NAFTA thing may be temporary, we seem to be going in opposite directions to the US when it comes to taxes. Anyway, my Canada crystal ball has never been foggier.
Thoughts?
It would be easy to blame the lagging TSX performance on NAFTA angst, the Trump tax bill, and the strength of the Cdn$, but the TSX has been languishing for much longer than that. Hard to believe that the TSX was higher than the DOW for most of 2011. Now the spread is rapidly approaching 10,000 points.
I know we survived the 2008 recession better than the US and may have benefitted from resources around 2011, but while the Cdn$, and maybe even the NAFTA thing may be temporary, we seem to be going in opposite directions to the US when it comes to taxes. Anyway, my Canada crystal ball has never been foggier.
Thoughts?
Re: What's wrong with Canadian market?
The super commodity cycle we enjoyed for much of the past 15? years came to an abrupt end circa 2014/2015. Try goggling some 10-15 year sector charts, e.g. capped materials index, or capped energy index.
Resuscitation of sorts may be starting to take hold though in both areas, courtesy of global GDP growth. Those who stock picked and/or avoided these sectors could have easily beaten the TSX Composite for several years. The broad indexers though might get some redemption going forward. Market timing anyone?
Added: On the energy side, the upward trend of energy from a 20 year chart is telling.... Up to 2008/2009, it could do no wrong. Since 2008/2009, it has mostly been in a ski slope on the downside. Materials is similar except it did not implode until mid-2011.
Resuscitation of sorts may be starting to take hold though in both areas, courtesy of global GDP growth. Those who stock picked and/or avoided these sectors could have easily beaten the TSX Composite for several years. The broad indexers though might get some redemption going forward. Market timing anyone?
Added: On the energy side, the upward trend of energy from a 20 year chart is telling.... Up to 2008/2009, it could do no wrong. Since 2008/2009, it has mostly been in a ski slope on the downside. Materials is similar except it did not implode until mid-2011.
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Re: What's wrong with Canadian market?
Why? Has something happened to the TSX? All I know is Canada's equities have beat two world economic powerhouses (China and U.S.A) based on real annual total returns from 2000 to 2016. We also had better returns over that time period than a World Globally diversified equity market, World ex-USA and Europe.
Re: What's wrong with Canadian market?
It obviously depends on what time frame you are considering.... The first decade of this century was an extraordinary good one for Canada.
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Re: What's wrong with Canadian market?
Indeed. While I may not need to be concerned about buying green bananas just yet, I might be pushing up daisies in another 18 years or be too senile to give a damn. Patience might be a virtue in some ways, but I'm glad I didn't apply it to a moving target like the market to such extremes back in 2000, or since.
Re: What's wrong with Canadian market?
Seems like a good commercial for diversification. I've always tried to balance my equities into US, CDN and International, notwithstanding it was somewhat painful to be in the S&P500 in the first decade of this century. Each market has its moments as the Periodic Table attests too.....
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Re: What's wrong with Canadian market?
Longer than moments. Comparing 10 year returns for 2017 to 5 years earlier, Canada and emerging markets were ahead of the US by about the same as the US is ahead of us now.
See my Fund Returns spreadsheet.
Code: Select all
Name Symbol 2012 2017
TD Canadian Index - e 8.9 4.4
iShares CDN Composite Index XIC 4.5
TD International Index - e 3.2 4.1
iShares MSCI EAFE Index EFA 3.2 4.3
CIBC Emerging Markets Index 10.6 3.0
iShares MSCI Emerging Markets Index EEM 3.7
TD US Index - e 1.6 10.4
iShares Russell 1000 Index IWB 2.6 11.1
Re: What's wrong with Canadian market?
The Canadian market is dominated by energy, materials and financials. This shouldn't be a concern as we have the ability to diversify by investing in US stocks. Especially within our RRSP or RRIF funds.
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Re: What's wrong with Canadian market?
From my perspective that is the best approach. It is fairly easy to reduce the lack of sector diversification in the Canadian market by investment in the US market.
Studies have shown that many investors knowingly or unknowingly exhibit a Home country bias that should be understood and acted upon.
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Re: What's wrong with Canadian market?
Our taxable portfolio has been diversified mostly equal sector wise (seven) and all in Canadian equities since 2010. No plans to change. I've been quite happy with our Canadian equity market, long term. No complaints here.
Re: What's wrong with Canadian market?
I am currently about 38% Cdn, 32% US and 15% International equities in my portfolio. Had I been more balanced such as 30% Cdn, 30% US and 25% International, I would have done better in 2017 (per the periodic table) but EAFE had some tough years due to Europe just preceding that and I didn't pay enough attention at the time to put more into EAFE for a better balance.
It is a mug's game and sector/geographic rotators are simply trying to market time. Few get it right and most of them are only successful some of the time, simply because it is coincidence, not brilliance. It all works out in the end, even if cycles can be multi-years in length, e.g. US down a good part of 2000-2010 partly due to the dotcom bust, e.g. Canada now down due to the commodity crisis, e.g. Europe down for several years after 2008-2009 for a number of reasons.
These are re-balancing opportunities and a key reason why diversification amongst asset classes and geographic regions works. Or one can just stay the course over the longer period and everything will revert to the mean.
It is a mug's game and sector/geographic rotators are simply trying to market time. Few get it right and most of them are only successful some of the time, simply because it is coincidence, not brilliance. It all works out in the end, even if cycles can be multi-years in length, e.g. US down a good part of 2000-2010 partly due to the dotcom bust, e.g. Canada now down due to the commodity crisis, e.g. Europe down for several years after 2008-2009 for a number of reasons.
These are re-balancing opportunities and a key reason why diversification amongst asset classes and geographic regions works. Or one can just stay the course over the longer period and everything will revert to the mean.
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Re: What's wrong with Canadian market?
If we ever do enter a period of inflation, as has been predicted for years since the unleashing of QE and ultra low interest rates, beneficiaries are expected to be energy and commodities. I've also read that emerging markets are a good place to be in that scenario. To the extent that CAD is a petrocurrency and Canada is commodity based, Canada is a quasi emerging market, and so the glory days might return again!
I remember when CAD was about 1.03 and Tom Bradley was pounding the table to buy US stocks, which were much cheaper then. That was insightful. But now that US stocks are hitting record highs by the day, and CAD is 80 cents, buying US stocks smells like buying at the top. If I were a US investor, I might be taking a hard look at depressed Canadian stocks.
I remember when CAD was about 1.03 and Tom Bradley was pounding the table to buy US stocks, which were much cheaper then. That was insightful. But now that US stocks are hitting record highs by the day, and CAD is 80 cents, buying US stocks smells like buying at the top. If I were a US investor, I might be taking a hard look at depressed Canadian stocks.
Re: What's wrong with Canadian market?
Back in beginning of 2010, both Dow and S&P/TSX were at similar levels, around 11,000. That they were trading at similar levels was an easy to remember coincidence, and I made a mental note to see where they would go from there. Today Dow is 26,000 and S&P/TSX 16,000. In 2010, another easy to remember coincidence was that USD and CAD were exchanging close to par. Today 1USD gets you 1.25CAD. Also, the question back in 2010 was: "What's wrong with the US market?". Turns out not much!
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Re: What's wrong with Canadian market?
My Canadian Stocks (VCN) have returned 8.5% in 2017. I see nothing wrong, there. I was quite pleased with the Canadian market.
Market-weighted International Stocks (VXC) have returned 15.9% in 2017. Of that, U.S. Stocks (VUN) only returned 13.0% in 2017. It would have been better to concentrate one's portfolio into developed markets outside North America (VIU) which had a 19.0% return in 2017. The best would have been to put it all into emerging markets (VEE) with a 22.5% return in 2017.
Unfortunately, I don't possess a working crystal ball to know these things in advance. That's why diversify my portfolio across domestic and international stocks, and across nominal and inflation-indexed bonds. I get average returns (not as high as a portfolio concentrated in the best asset, not as low as a portfolio concentrated in the worst asset).
Market-weighted International Stocks (VXC) have returned 15.9% in 2017. Of that, U.S. Stocks (VUN) only returned 13.0% in 2017. It would have been better to concentrate one's portfolio into developed markets outside North America (VIU) which had a 19.0% return in 2017. The best would have been to put it all into emerging markets (VEE) with a 22.5% return in 2017.
Unfortunately, I don't possess a working crystal ball to know these things in advance. That's why diversify my portfolio across domestic and international stocks, and across nominal and inflation-indexed bonds. I get average returns (not as high as a portfolio concentrated in the best asset, not as low as a portfolio concentrated in the worst asset).
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Re: What's wrong with Canadian market?
VCN vs VUN over 5 years is 30% vs 100%. Not a problem?longinvest wrote: ↑20 Jan 2018 17:51 My Canadian Stocks (VCN) have returned 8.5% in 2017. I see nothing wrong, there. I was quite pleased with the Canadian market.
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Re: What's wrong with Canadian market?
Nisser,
It's normal for two markets differ in returns.
Am I missing something?
In the 5 years spanning from 2000 to 2004, the Canadian market gained 3.6% annually while the US market lost -5.0% annually. That's a cumulative 19% gain for Canada and a cumulative -22% loss for the US, a difference of over 40% in 5 years.nisser wrote: ↑21 Jan 2018 02:20VCN vs VUN over 5 years is 30% vs 100%. Not a problem?longinvest wrote: ↑20 Jan 2018 17:51 My Canadian Stocks (VCN) have returned 8.5% in 2017. I see nothing wrong, there. I was quite pleased with the Canadian market.
It's normal for two markets differ in returns.
Am I missing something?
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
Re: What's wrong with Canadian market?
Perhaps rebalancing a little more frequently.