It’s not much, but anything is better than nothing. To follow the obvious logic further, anything is better than something less than nothing. Such is the clear dichotomy that separates the American financial markets from our Canadian counterparts. For all the talk of a bull market recovery, we sure are taking our sweet time. After two and a half months since the new year, both the S&P 500 and the Dow Jones Industrial Average are still underwater.
It may not be in the red by that much — a little more than -1% — but still, negative is negative. And that certainly has those who are not bitten by the permabug virus to think more prudently about the U.S. markets. Capital growth has been hard to come by, despite the fact that on paper, data such as the most recent jobs report would suggest that we are churning and burning!
This sets up a pretty bearish outlook for the rest of the year. First off, would investors continue to pour in money into the markets for the low returns that are provided? Hedge funds can’t survive off quarterly performances that merely break even, or God forbid, lose money. Second, if the markets aren’t going anywhere now, there’s a good probability that they will eventually move downwards. Wall Street knows much of the so-called positive data are paper tigers — they’re hoping you’ll believe the nonsense while they dump out of their positions.
With that in mind, many investors may look towards Canada. No, the Toronto Stock Exchange is not blowing our minds with its current 4.6% year-to-date returns. But look at it this way — at nearly 5% growth, that’s 5% more than we have. And we still need to get over our -1% deficit.
Technically, the TSX is postured much more confidently than either the Dow Jones or the S&P 500. Whereas the Dow suffered a steep freefall right off the opening gate of 2016, the TSX’s decline was comparatively controlled. The TSX also broke even for the year in early March, and has used the ensuing sessions to add respectable gains. On the other hand, the Dow is clearly trapped by upside resistance.
While it’s not guaranteed that the TSX can continue to move forward and leave the U.S. markets in its wake, the fundamental evidence looks compelling. Canada is a very resource rich country, not only in energy commodities like oil, but in precious metals and stones like silver and diamonds. In fact, some of the world’s biggest and best-run silver production companies are headquartered in Canada. But the country has a diverse range of investment opportunities, including banking giant Toronto-Dominion, which offer safer returns and higher dividends than American counterparts like JP Morgan.
The case here isn’t that people are going to get rich on Canada; rather, it’s an alternative place to park your money and earn some decent passive income. And if the smelly stuff goes down, Canadian markets appear to have more strength to manage the volatility.