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7 Takeaways on Canadian Markets Post 2016 U.S. Presidential Election .

Webinar Recap: Nasdaq Advisory Services held a webinar on March 15, 2017 to discuss current market conditions, cross-border flows and trends within Canadian-based equities.

7 Takeaways on Canadian Markets Post 2016 U.S. Presidential Election

Canadian Flag and ParliamentIn 2016, the TSX was the top performing index in developed markets with gains of almost 18%. Since the 2016 U.S. Presidential Election, the TSX has been one of the worst-performing indexes in developed markets only outperforming the likes of Israel, New Zealand and Hong Kong. To better understand recent Canadian market conditions, Nasdaq Advisory Services held a Canadian Market Update webinar on Wednesday, March 15, where Nasdaq Advisory analysts discussed what new U.S. policy implications may mean for Canadian stocks, recent cross-border U.S.-Canada flows and trends within Canadian-based funds.

Below are seven key takeaways from the webinar that provide insights into recent Canadian market activity:

  1. The TSX has made reasonable gains of approximately 6% since the 2016 U.S. election, hitting an all-time high of just under the 16,000 level in February 2017. In recent weeks, the TSX has pulled back towards the immediate post-U.S. 2016 election range just below the 15,500 mark and could potentially drop further if lack of clarity on policies and worries about the Federal Reserve continue.
  2. Materials and Energy sectors continue to struggle while Financials are driving the benchmark. The Materials and Energy sectors account for approximately 33% of the TSX. Both sectors have struggled since the 2016 U.S. election due to the rise of the dollar, oil output concerns and pro-risk sentiment. The Financials sector accounts for approximately 35% of the TSX, heavily weighted by the presence of eight banks. It is the Banks in particular that have been helping drive the index higher with gains of near 17%.
  3. Canada’s reliance on the U.S. for trade continues to increase. With U.S. trade accounting for approximately 33% of Canadian GDP, potential changes in U.S. trade policy will likely have implications on the nation’s output. Canada’s trade with the E.U. and China has not followed the same trend.
  4. Interest from international investors in Canadian equities and debt remains strong. However, Canadian investors pulled $3 billion out of international equities following the 2016 U.S. election.
  5. Canadian-based investors overall are favoring TSX-100 companies with earnings growth in the U.S. While large U.S.-based institutional investors have increased their exposure in TSX-100 companies, investments from European investors has decreased.
  6. With exception to the resource and mining sectors, hedge fund activity in TSX-100 companies has decreased since the 2016 U.S. election. Interest by large U.S. hedge funds in companies outside of the TSX-100 tends to be more sector thematic than company specific. U.S. hedge funds could potentially target weakness and tie-ins in the Canadian housing market even though the short interest has been on the decline.
  7. U.S. investors tend to be long-term focused and reliant on broker coverage when it comes to investments in companies outside of the TSX-100. Many of the large Canadian investors tend to have sector-focused funds for companies outside of the TSX-100.

IRO takeaways for Canadian markets:

  • Any weakness in the TSX as a result of commodity pressure or a weakening Canadian dollar may likely continue to attract international investors which have continued to show interest in both Canadian debt and equities.
  • Bearish sentiment from U.S. investors continues to decrease against Canadian stocks indicating further investment potential in the near-medium term for Canadian IROs.
  • Canadian investors continue to show favor towards investment options which could allow for exposure to U.S. revenue streams and growth.
  • Stay tuned to upcoming Nasdaq Advisory Services blogs and thought leadership as we continue to monitor investor trends and activity.

If you missed the Canadian Market Update webinar, register here to listen to the replay: http://edge.media-server.com/m/p/fj8w7eje. If you have any questions or would like to learn more about current Canadian market conditions, contact us at Corporatesolutions@nadsaq.com.


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