Recent Canadian Dollar's Strength and what this means for Your Investments

July 14, 2017

 

The recent strength in the CDN$ has caught many by surprise with it swift appreciation against the US$.  This has negatively affected Canadian investors who have investments outside Canada.  Owning investment in other countries has still provided BETTER RETURNS than owning the Canadian benchmark which is down .84% year to date. 

 

As you can see in the chart below (squint) the CDN$ is now overbought after hitting the high of 2017 (near 79 cents).  A pullback would see support in the 75 to 76 cent range.

 

 

 

MY suggestion for travelers needing US$ is to BUY the US$ at these levels.

 

I have included some comments from one of BLACKROCK’s top people.

 

BlackRock's chief strategist predicts where interest rates, the loonie and the TSX are heading next

 

‘I started the year rather pessimistic on the outlook for Canadian stocks given high relative valuations, concerns about the effects of U.S. policy change and an uncertain outlook for oil. At this point, the TSX has so vastly underperformed global markets in the past six months that valuations appear much more reasonable...

I think Canadian equities can potentially stage something of a comeback in the back half of 2017, but I would also highlight our positive views on Europe, Japan and emerging markets’

 

‘I would say we're most positive on emerging markets at this stage given the long dormant performance and the exodus of assets from the region. Investors have begun to return to emerging markets, but there is still a large valuation discount and plenty of room for flows to shift back. Earnings look better against a backdrop of substantial reform and improving global economic conditions.’

 

‘I think there is a risk to being under-risked. Low volatility is a reflection of the sustained and synchronized expansion, not a sign of complacency. It takes a trigger to go from a low volatility regime to a high volatility regime, and we don't see a recession flipping the switch in the foreseeable future. Low volatility is more the norm than the exception...’

 

‘After the sharp rise in the loonie in the past few weeks, I can appreciate (pun intended) the interest in hedging foreign currency exposure. However, I don't see sustained strength in the Canadian dollar from here and would generally prefer unhedged exposure to international equity markets.’

 

 

As usual, I encourage those that have not had a recent meeting (last 60-90 days) to arrange a time to review and update their plans.

 

Disclaimer:

The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Argosy nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. The securities mentioned in this report may not be suitable for all investors nor eligible for sale in some jurisdictions. This research and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without the prior express consent of Argosy.

 

‘historical analysis does not reflect future returns’

 

‘historical analysis does not reflect future returns’

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