Exchange traded funds (ETFs) cover many areas around the globe and can be directly affected by the local economy. The Canadian economy has been doing well, so what does that mean for the ETF? Last week, the Canadian dollar pulled ahead of the U.S. dollar as domestic core rate of inflation rose to a four year high. Core inflation is at 2.5% and the Canadian dollar was at C$1.0995 to the U.S. dollar. Reuters report the Canadian dollar is up 6.6% in the past two months due to higher commodity prices, a weaker U.S. dollar, strong domestic data and merger talks with Canadian companies.
Elsewhere in the Canadian economy, a boost in auto products helped push up wholesale trade 1.9% – better than expected. Wholesale sales have posted gains during the past months and keep moving upward.
The Canadian ETF, iShares MSCI Canada (EWC) is up 15% year-to-date and top holdings include financial and energy companies which have fared well this year. One holding in this ETF, Bank of Montreal, recently reported they would have to revise financial statements due to natural gas trading losses. The Bank of Montreal makes up 3% of EWC.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.