AllMarket Outlook
logoArgusOctober 14, 2020

Daily Spotlight: Canadian Economic Rebound Continues

Market Outlook
Bullish - Short term
Summary

Widespread lockdowns in April (to slow the coronavirus) took their toll on the Canadian economy, with GDP contracting at an annualized 39% rate in the second quarter. Just-reported July GDP showed a 3% rebound, with even better 6% growth for the manufacturing segment. Low oil prices, with Energy being a dominant sector for the Canadian economy, hindered the recovery. But the Canadian government is pushing for several stimulus measures, including a C$7.5 billion infrastructure plan to help job growth rebound, and an extension of an emergency wage subsidy until next summer. While banks have struggled with low interest rates, consumers are benefiting from record low mortgage rates. The Canadian real estate segment has been a strong performer. With helpful stimulus measures, the Canadian stock market has trailed the S&P 500 only modestly, with the TSX 60 index at around breakeven for the year, versus a 6% rise for the U.S. benchmark. Much of that trailing performance can be attributed to an outsized weighting in the Financial Services and Energy sectors, where low interest rates and oil prices, respectively, have taken a toll. We continue to like Canadian company exposure for diversification.

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