Canadian investors are finding themselves in an unusual position — outperforming their U.S. counterparts across all three main asset classes as conciliatory central banks reignite risk in global markets.
Canada’s benchmark S&P/TSX Composite index has surged 8.5 per cent this year, second-best among developed markets and ahead of the S&P 500’s 7.6 per cent rise. The Bloomberg Barclays Canada Aggregate bond index is up 0.75 per cent compared with 0.53 percent for the U.S. And the loonie is the best-performing currency among its Group of 10 peers, vaulting 3.9 per cent higher to $1.3132 per U.S. dollar this year.
“The most powerful thing has been the change in tone coming from global central bankers and particularly those in North America,” said Kurt Reiman, chief investment strategist at BlackRock Canada, adding markets also seem to be less worried about geopolitical risks.
Canadian investors aren’t used to being in the limelight. Annual returns on Canadian equities have lagged the U.S. by about 5.8 percentage points for the past 10 years while the loonie has sunk about 6.5 per cent against its U.S. counterpart over that time frame.
But confronted with slowing growth, tame inflation and volatile markets at the end of last year, central bankers have changed their tune. Federal Reserve Chairman Jerome Powell signaled on Wednesday that the U.S. central bank is done raising interest rates for a while and it will be flexible in reducing its bond holdings.
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