As some economic pundits saw Canada as a country on the verge of recession at some point last year, other analysts put their hope on the economy’s signs of recovery, albeit slow. Economic growth was below 1% for a greater part of the year, but signs like the slow recovery of the loonie and the Toronto Stock Exchange give prospects of a 1.4% growth this year.
The State Of Stock Exchange in Canada
Investors at the Toronto Stock Exchange (TSX) appear hopeful, and transactions that have taken part in the past month point to a bullish attitude amongst equity fund managers. This is despite the anxiety and pessimism that had gripped the equity market some months ago. This optimism is not baseless considering the significant rise in the S&P/TSX Composite Index, which has risen a respectable 11% in just the last month. It helps matters too that the Canadian currency has gotten stronger and gained around 4% against the US currency in the same period.
Still, investors are still a bit cautious having observed their hope going up and getting crushed in the course of last year. Gladly, the improving performance of commercial banks and the mining companies is giving credence to investor confidence in the economy. Currently, fund managers are talking of fundamental momentum in the Canadian stocks. Such positivity can only give a boost to the local economy. Even investment experts like Jason Mann of EdgeHill Partners are optimistic about the prospects of the market this time.
Tangible Evidence of Positive Turnaround
Not only has the loonie picked and the TSX at its brightest since 2014, but the price of oil has also becoming more favorable for Canada as an exporter. Its cost per barrel, as quoted at the New York Mercantile Exchange towards the end of the second week of March has gone up by 1.7%. The value of crude oil itself has risen by over 40%.
The mortgage sector is also improving significantly. For example, the stocks for Home Capital Group Inc, which had seen a big drop in 2015, are recovering well, surging by 35%. The stocks of Crescent Point Energy Corp. too, which is the biggest economic player in Canada’s territory of Saskatchewan Bakken, have risen by 27%, after suffering a 40% drop last year.
David Baskin, who is the president of Baskin Wealth Management, is among the experts excited about the prospects of Canada’s economy. His observation is that although the value of stocks may not necessarily shoot overnight, signs are that it will continue on a steady rise as the market expands 30% before achieving its full potential. His advice is, therefore, that it is safe to buy stocks on the TSX now in concurrence with the bullish market.
Still, Martin Roberge, who is an analyst with Canaccord Genuity Corp., is a bit cautious, seeing the possibility of the upward market surge as temporal. Anyone looking from Roberge’s perspective is likely to note also the rising rate of unemployment; now at 7.3%, and at its highest within the past 3yrs. Worse still, economists can foresee that rate rising because of the poor performance in the energy sector and imminent lay-offs.
On the contrary, David Baskin sees the positive performance at the stock exchange as a precursor to a cyclical shift soon to be witnessed. Besides, the housing market in Toronto and Vancouver continue to attract international investors even as short selling is rife due to the indebtedness of many households. There is also optimism emerging from the Bank of Canada, which recently confirmed the improved performance of non-energy exports. In addition, the bank sees the signs of recovery in the US economy as portending good news for Canada.