Strong US Dollar is Helping Canadians with Their Investment Portfolios
Global Equities are down about 1% this year (vanguard total world ETF) though currency moves are playing a big part in whether you have a small loss or gain so far this year. Investors with exposure to the United States may actually be up on the year as the US$ has moved higher against most currencies of the world including the CDN$ (see chart below)
The CDN$ has lost over 5% year to date to the greenback. This is good if you own stocks US stocks though painful if you have yet to pay for your vacation down south. The move lower for the CDN$ against the US$ may not be over with the Signature Group (CI investments) seeing a possible move to 70 cents. So far they have been correct and their global equity funds have benefitted from the strong US currency. An example of this is the CI Signature Global Income and Growth Fund which is up 6.16% year to date (as of 1/28/2015).
During the financial crisis the CDN$ went to almost 75 cents so these levels are not a distant memory (see chart below). During that period we saw the CDN$ move from 1.10 to about 74 cents very quickly as the world sought out what they believed was the ‘safe’ haven of the US$.
This time the flight to the US$ is because U.S. interest rates are slightly higher than most developed nations and the U.S. economy is healthier than most developed nations as well. In order to invest in U.S. government bonds or U.S. companies you need U.S. dollars and that increased demand is one of the reasons for the greenbacks move higher.
So far the strong US$ is helping many Canadians in their investment portfolios if not in paying for their southern vacation J
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The views expressed do not necessarily reflect the opinion of Argosy Securities Inc. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. Please consult a professional before making an investment decision.