All in all, the groups agree: Canada is going to grow again. But when?

In a survey conducted by the Canadian Institute of Chartered Accountants and Royal Bank of Canada’s Business Monitor, a reported 28% of respondents, up 4% from the first quarter, expressed their optimism for the economy over the next 12 months, writes Frank Pingue for Reuters.

Increased optimism among senior-leveled chartered accountants (CAs) does seem comforting. However, two-thirds of the CAs believe the economy will return to growth by the second quarter of 2010 while the other third believes growth will resume after the second half of next year, reports Derek Abma for Financial Post.

On the other hand, the Royal Bank of Canada’s economics research division and the Bank of Canada both anticipate a return to growth in the third quarter of this year. It is believed that the CAs who are working “in the trenches” would express greater pessimism than economists in commercial and central banks.

• iShares MSCI Canada Index (EWC): up 39.1% year-to-date

For more information on Canada, visit our Canada category.

Max Chen contributed to this article.

Sheryl King, the new chief economist for Merrill Lynch Canada, estimates a 1.8% contraction for the Canadian economy in the second quarter, a 1.3% expansion in the third quarter and a 3.8% increase in the fourth quarter, reports Heather Scoffield for The Globe and Mail. She projects a a slow 1.5% crawl for the economy by the end of 2010.

The output for 2009 is calculated to be a 2.0% decline, trailed by a 2.7% expansion in 2010.

King thinks the Bank of Canada will rein in its economy-fueling measures too quickly and hinder the economy. Unemployment rate is expected to top off in a couple of months at below 9% and drop to just above 8% next year.

According to Dale Orr Economic Insight, Canada’s economy may need up till 2014 to reach 95% of pre-recession levels,  writes Jim Goddard for News1130. Traditionally, Canada’s economy only gets stronger after recessions, but it takes time to trim the fat while maintaining some flexibility.

• iShares MSCI Canada Index (EWC): up 20.1% year-to-date

For more information on Canada, visit our Canada category.

Max Chen contributed to this article.

In Ontario, the Green Energy and Green Economy Act, similar to Germany’s successful feed-in tariff approach, is going to open the gates for the clean energy sector in the province, write Greg Boutin and Jon Worren for Renewable Energy World. The bill is expected to pass any6 day now. The only criticism is that the bill does not look at long-term targets for renewable energy.

One big plus of the act is its potential to create 90,000 “green” jobs, a report recently concluded. About $47 billion will be spent over 10 years, reports Ryan Bolton for the Daily Commercial News. This could lead to jobs for construction workers, engineers and sheet metal workers. Canada’s economy could use the push – it shrank 7.1% in the first quarter.

Canada still has a long way before it can match the energy production of Germany. Canada’s installed capacity is less than 50 megawatts, while Germany has more than 5000 megawatts.

There is a 100 megawatt estimate for 2010 in which 20% will come from solar parks, 40% from commercial rooftop systems and 40% from residential and smaller systems.

The government will also launch an Emerging Technologies Fund on July 1, 2009. The fund will match investments from private sources in technology companies. Cleantech companies have already started to announce new installations in Ontario.

• iShares MSCI Canada Index (EWC): up 25.8% year-to-date

Max Chen contributed to this article.

Why has President Barack Obama praised Canada’s financial system? And why were all of Canada’s main banks profitable in the quarter ending Jan. 31?

• Cultural Differences. Evidently, the differences between the United States and Canada are deeply ingrained, with the U.S. taking on more risk and Canada remaining conservative, with a 20-30% band that the Royal Bank of Canada imposes on the share of earnings that its capital-markets business can contribute.
• Structural Differences. The Economist explains that the structural differences within the two countries banking systems make a big impact also, with the most striking divergence between Canada and America is in their regulation of mortgages. There are five dominant banks in the country, which cuts down on price competition. In Canada, less than one-third of mortgages originate with independent brokers; at the height of the housing bubble, that number was around 70% in the United States.
• Heavy Restrictions. Banks in Canada are subject to tight supervision, with maximum leverage ratios and a single regulator regime for commercial and investment bankers.
• Mortgage Regulation Differences.While the interest paid on home loans is tax-deductible in America, this encourages people to borrow more. Canadians taking out mortgages with a loan-to-value ratio over 80% must also take out insurance on them from a federal agency. Banks insure the rest of their portfolios with the Canada Mortgage and Housing Corporation (CMHC). This insurance brings the risk weighting down to zero, and eliminates any capital advantage banks might get from securitization.

• iShares MSCI Canada Index (EWC): up 19.9% year-to-date

• The Canadian dollar has been able to recover and incur a gain, as the rise in oil prices has given Canada a much better position as far as investment opportunity.
• Oil is a major Canadian export, which has taken the higher oil prices in stride, along with the higher equity markets and upbeat corporate news from North America and overseas.
• These all combined to boost the Canadian currency to its highest level since April 16, reports Frank Pingue for Financial Post.
• In fact, the Bank of Canada said today that there are elements present that could lead to the recovery of the economy this year, reports AHN.

Earlier in the week the swine flu scare had halted major markets, including the Toronto stock exchange, but it seems like the scare may be dwindling and markets are resuming to somewhat “normal” volume. Canada is also joined by the upbeat sentiment by commodity rich Australia and New Zealand.

• iShares MSCI Canada ETF (EWC): up 11% year-to-date

• CurrencyShares Canadian Dollar Trust (FXC): up 2.3% year-to-date

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Brazil and Canada are in good positions for the economic meltdown, because of these areas of strength:

1. Falling interest rates
2. Operating on long-term double surpluses
3. They possess items other countries fund valuable, i.e. commodity-rich

Imari Love for Morningstar reports that with the major instability we’ve seen recently in currency exchange rates, a country with a current account surplus offers investors an important source of protection. A current account surplus also signals an inherent competitive advantage within a country; essentially, the world has more of a need for the country’s products than vice-versa. Both of these countries are rich with commodities other countries really need.

Countries that cut interest rates are also in the midst of stimulating consumer spending, which in turn , liven up economic growth. While cutting rates can lead to higher inflation and a weaker currency, the current account surplus again offers some protection. Compared to the other countries that are cutting rates and carry a large deficit, these countries are sitting pretty.

Long-term economic profiles for Brazil and Canada mean there are easier says ahead for them, than most. These countries are showing strong fundamentals while near-term indicators are not yet ripe, however, this means steady growth is ahead:

• Brazil: The Bovespa is up 8.26% year to date after dropping 70% in 2008; iShares MSCI Brazil (EWZ) is up 24.6% year-to-date

• Canada: The Canadian market is down 4.36% year to date, after falling by more than 35% in 2008; iShares MSCI Canada (EWC) is up 5.5% year-to-date

CNW Group reports that 60% of managers are actually bullish toward Canadian stocks, and about 75% of them expect gains in the Canadian energy sector. The stability of the U.S. housing market is the indicator that managers are using as a clue that financial markets are recovering.

Overall, Canadian managers are speculating on energy, materials and the financial sector as the sectors with the most potential. Canadian markets had the worst-performing asset class at the end of 2008 besides emerging markets, so the renewed faith in over 60% of managers is fulfilling.

But is it really so? Not everyone is so certain: one forecaster offered a grim employment outlook for this year, saying the economy “fell off a cliff” in the first quarter, reports The Canadian Press. The forecaster predicted that unemployment would peak at 9.5% by the middle of 2010.

With all this conflicting data and opinions, what’s your best bet? Mind the trend lines and leave your emotions out of it.

• iShares MSCI Canada Index (EWC): down 2.1% year-to-date; up 21.7% for one month

Canadian Prime Minister Stephen Harper advocated a positive economic outlook after announcing $14 billion in new spending for infrastructure and energy, according to CTV. There will also be $2.3 billion investment that will include upgrading the drinking water system.

It is seen that the Prime Minister’s optimism is just and will head off any unnecessary panic that would undermine consumer and business confidence, reports Paul Weinberg for Inter Press Service.

But there are others who see a more grim outlook. Parliamentary Budget Officer Kevin Page calculated a 385,000 job loss by July and a 15.3% drop in gross national income in the last quarter of 2008. Recent forecasts have Canada’s economy contracting by 2.5%.

David Dodge, former chair of the Bank of Canada, thinks that an economic rebound in Canada may not occur until levels of output and rates of growth return, which may not stabilize until 2013. Canadian banks were well-regulated in the past and accordingly did not sustain bankruptcies seen elsewhere.

Canada’s economy is very much tied to that of the U.S. economy’s and is also vulnerable to the whims of Washington. It is thought that U.S. export-related recovery brought on by domestic public investments and depreciated U.S. dollar could hurt Canada’s ability to trade with the United States.

• iShares MSCI Canada Index (EWC): down 7.1% year-to-date
  

The Bank of Canada predicts that 2009 will be a difficult year, but the depreciation of the Canadian loon and quick measures should help shore up too many losses. Real gross domestic product is expected to drop 1.2% in 2009 but will rebound 3.8% in 2010, but figures are uncertain in times such as these, reports Jennifer Kwan for Reuters.

A rebound in the economy can be supported by a well-maintained financial system, a surge in external demand, and a firming of commodity prices. The Canadian economy is reliant upon exports, especially to the United States. Bank of Canada’s warning this week that one of the “main downside risks” to the Canadian economy is the impact on spending of the collapse in the U.S. housing boom; 80% of exports go to the United States, reports Canada.com staff.

The relationship between the United States and Canada explains why Obama’s first country to visit after his inauguration was Canada.

• iShares MSCI Canada (EWC): down 9.7% over three months; down 4.1% over one week

The Canadian economy will receive a good jolt as the the Bank of Canada cut key interest rates on Tuesday by .75% to 1.5%, an impressive 50-year low, reports Ian Austen for The New York Times.

After staying relatively isolated from the crisis stemming from mortgage and banking woes, Canada has accepted that it is entering a recession because of global slowdown and the effects of deteriorating energy and commodity prices, coupled with drops in exports to the United States.

Prime Minister Stephen Harper has stated that additional fiscal policies, such as a stimulus package, will also be needed to address problems in specific sectors of Canada’s economy, write Randall Palmer and David Ljunggren for Reuters.

Specifically, the Conservative government is being pressured to help struggling automakers and potentially save thousands of jobs in the auto sector.

Hopefully, ameliorating effects of cut rates and potentially a future stimulus plan may boost the straggling Canadian ETF iShares MSCI Canada Index (EWC), which is currently down 49.8% year-to-date.