Special Canadian Value

by | Jul 5, 2017 | Archives

How does the Canadian Stock Market compare to the US markets?  Yesterday’s message looked at the Concept Conversion Trick (1) and how the American Dream has become the Canadian Dream.  Canada’s middle class earns more, works less hours and lives longer than the middle class in the US.  Canadians have a cradle to grave health care system and an excellent education system.  Year after year, Canada scores in the top 10 happiest countries in the world.

So, let’s compare the Canadian Stock Market to the US market using a mathematical, good value approach.

The Canadian Market is not ranked as a good value developed market by Keppler Asset Management, but it has so many good value qualities that I personally added this market to my portfolio, using the iShares MSCI Canada Country ETF (symbol EWC).

In January 2017, a Purposeful investing Course update looked at some reasons why the Canadian Market offered special opportunity.  This update examines reasons why that good value still exists.

Over the last six months, the Canadian ETF (EWC) has risen 3.2% as shown in the Finance.yahoo.com chart below.

This ETF is a passive fund that tracks the investment results of the MSCI Canada Index.  The fund invests at least 90% of its assets in the securities of its underlying index which consists of stocks traded primarily on the Toronto Stock Exchange.


The S&P 500, Dow and NASDAQ indices (red, green and purple) have outperformed the Canadian Index in these last six months.

However, long term, the Canadian MSCI Index has strongly outperformed both the Dow and S&P and is about equal in growth to the NASDAQ index (in red).


The strong Canadian performance in spite a weakening of the Canadian dollar.  This means that Canadian share performance has been even stronger than the chart comparison suggests.  Canadian shares rose with extra strength to make up for the currency loss.

In the last six months, however, the US dollar has started to fall versus the Canadian dollar.  This could give the Canadian market an extra boost in US dollar terms.


We can also see strength in the Canadian dollar at the Economist’s review of “Trade Balances, Budget Balances and Interest Rates” (1).  The US dollar currently has the advantage on interest and trade balance but these factors can shift quite quickly compared to budget balance.  The Canadians have a much better budget balance position.  Simply put, the Canadian government creates less debt in relation to GDP than the US government does.


We can also see from Keppler’s basic analysis that Canadian shares overall represent much better value.




Canadian shares are selling at 2 times book compared to 3.09 in the US.  Price earnings is  22.5 compared to 23.9 and the 2.84%  average dividend yield is much stronger than America’s 2.01%.

The trending math we follow at Tradestops.com suggests that Canada (or EWC at least) is still in a buy mode.


Tradestops gave an entry alert a year ago in July 2016.  The stock indicator shows that the upwards trend remains.  The stock has a low volatility ratio of 14.33% and currently the stop price is $23.74.

You can learn how to use Tradestops.com below. (2)

Should we invest in the Canadian Market?   The Canadian Market is a well regulated market, in a safe country with sane politics.  The numerous suggestions above suggest that this market is in a rising trend short term and has been a solid market over a long period of time.

Over the last six months a poor value market (the US) has outperformed a neutral to good value market (Canada).  Eventually the fundamentals of math and common sense will turn this trend around.  Logic leads us to expect that, given time, the Canadian market will do well in relationship to the US market.  This does not guarantee great performance as all markets could fall.

The final decision of whether Canada represents a good place to store value for you depends on how much risk and what time horizons suit your nature and circumstances.  There is risk in every investment, but we get to decide how much risk we take and investing in the Canadian MSCI looks as if a sound investment with minimum risk at this time.


(1) Learn more about Tradestops.com here

(2) www.economist.com: Trade exchange rates budget balances and interest rates


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