How Canada will benefit from global recovery
As the global economy gathers strength, Canadians want to know: How will Canada benefit and where will the best opportunities be? To help answer these questions, here is a sector-by-sector overview of the Canadian market, highlighting the underlying factors and the potential for growth in the coming months.
Financials
Because banks are extremely sensitive to changes in the economy, they’re looking at high growth potential at this stage of the recovery.
Canadian banks are well regarded internationally, and have been significantly better positioned than their peers in other countries, most notably throughout this tough economic time.
Commodities
As various economies recover, demand for Canadian commodities such as oil, base metals, materials, and potash will increase.
China, India, Brazil, and other develop- ing countries are expected to grow faster than industrialized nations, making these countries the biggest drivers of demand. Note, however, that the U.S. remains Canada’s largest customer for oil.
Gold
The U.S. dollar is likely to continue its depreciation further into 2010, which is good news for gold. Traditionally, commodity buyers turn to gold as a hedge against rising commodity prices, since commodities are typically denominated in U.S. dollars.
Also, if the threat of inflation surfaces as a result of government stimulus in so many countries worldwide, investors who fear inflation will flock to gold as a safe haven.
Defensives
Defensive stocks such as utilities, telecommunications, and consumer staples are not particularly sensitive to fluctuations in economic health. This also means, of course, that they’re going to be slow to respond to a recovery. Nonetheless, thinking longer-term, this sector should form a solid foun- dation in a well-diversified portfolio because of its lower volatility.
Consumer goods
Consumer spending has begun to revive in Canada, but in the U.S., which is the biggest market for Canadian goods, spending is sluggish due to high unemployment. In addition, the strong loonie is making Canadian products more expensive for Americans to buy.
Multinational companies that serve the growing middle class in emerging economies will benefit as China, India, and Brazil are expected to lead economic growth.
Technology
Demand for new, innovative consumer technologies — such as the smart phone, for example — is exploding, with sales estimated to rise by 29% in 2009. In addition, Canada’s RIM was named the fastest-growing company in the world by Fortune magazine and U.S. company Apple set sales records with its new iPhone.
Industrial goods
This sector includes machinery and components to manufacture goods as well as transportation and shipping, all
industries that will benefit from economic recovery as businesses and consumers begin to increase spending.
We can help ensure that your portfolio is positioned to benefit from an improving economy, with investment recommendations that are tailored to your personal situation and risk tolerance.