Daily Spotlight: Canadian Economy Shows Signs of a Rebound

Along with the rest of the world, Canada has not been immune to the effects of COVID-19. The Canadian economy has many positive attributes, including the world's third-largest proven petroleum reserves (behind Venezuela and Saudi Arabia). The pandemic took its toll on Canada's workforce, but like other developed economies, the country is seeing a rebound in employment and household income, with a strong 290,000 jobs created in May along with a 6.3% rise in hours worked. Similar to U.S. fiscal-support measures, out-of-work Canadians have been supported by an extra C$500 per week from the Canada Emergency Response Benefit (CERB). We note, however, that the Canadian stock market does have an outsized (relative to the U.S.) weighting in the Financial and Energy sectors, which have been hurt by low interest rates and depressed oil prices. Not surprisingly, the benchmark TSX 60 index has modestly trailed the S&P 500 year-to-date with a 7% decline, versus a 2% drop for the U.S. benchmark. Still, our recent coverage expansion has been finding well-positioned Canadian companies that we believe could benefit in a variety of environments.