Canada ETFs Are Having a Great Year

Canadian markets and country-specific exchange traded funds are enjoying their best first half year since the financial crisis, as investors have jumped back into cyclical plays with the economy rebounding.

Year-to-date, the iShares MSCI Canada ETF (EWC) has increased 21.6% and the JPMorgan BetaBuilders Canada ETF (BATS: BBCA), the largest ETF dedicated to Canada’s market, has advanced 21.7%. In comparison, the has S&P 500 gained 15.3% so far this year.

Canada’s S&P/TSX Composite index has outperformed the S&P 500 and MSCI World Indices, Bloomberg reports. The benchmark last climbed over 15% in the first half of a year in 2009 after the markets rebounded from the plunge during the financial crisis of 2008.

“The first half of 2021 has largely gone according to script – Value and Quality factor styles have somewhat outperformed the market,” CIBC’s strategist Ian de Verteuil said in a note, adding that if the market continues to expect improved economic growth and higher interest rates, the two styles strategies could continue to outperform.

Among the best-performing areas of the Canadian markets, the TSX energy index has outperformed all other sectors this year, surging over 30%, after the rebound in crude oil prices from a pandemic low and the rotation into value and more economically sensitive stocks.

The energy sector makes up 13.9% of EWC’s underlying portfolio and 13.8% of BBCA’s holdings.

Healthcare stocks were the second-best performers in Canada’s market.

Canaccord Genuity’s portfolio Strategist Martin Roberge argued that the momentum in quality and value stocks could continue as investors don’t seem to be letting up anytime soon.

“A key takeaway from our virtual roadshow with clients is that many find equity markets overvalued, but very few are willing to jump ship since value stocks are not expensive enough, in their view,” Roberge told Bloomberg.

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