ETF Trends
ETF Trends

With U.S. stocks soaring again this year, it is easy for investors to overlook Canada. However, the northern neighbor to the U.S. is home to its own impressive equity market. The iShares MSCI Canada ETF (NYSEArca: EWC) is higher by nearly 11% year-to-date.

Canadian stocks, which sagged for much of the first three quarters of 2017, are getting a lift from rebounding oil prices and financial services shares. The country is one of the world’s largest oil producers that is not a member of the Organization of Petroleum Exporting Countries (OPEC).

“After wallowing in the red for a good chunk of the year, the S&P/TSX has gained 6.5 percent since its September low,” reports Bloomberg. “That strength is the result of improving oil prices, rising interest rates which have fattened banks’ lending margins and, perhaps most importantly, a market that had simply become too cheap to ignore.”

Other Canada ETFs include the First Trust Canada AlphaDEX Fund (NYSEArca: FCAN), Guggenheim Canadian Energy Income Fund (NYSEArca: ENY) and the IndexIQ Canada Small Cap ETF (NYSEArca: CNDA).

Canada’s oil production could either lift or weigh on the economy, depending on the energy market. Additionally, as we hear more about droughts and dry weather conditions, Canada’s freshwater reserves, which account for 20% of the world’s freshwater, could come into play.

EWC, the largest US-listed Canada ETF, holds 93 stocks. The $3 billion ETF allocates almost 43% of its weight to the financial services sector and 21% to energy stocks. Materials and industrial names combine for almost 18%.

“Even with its recent gains, the Canadian index is way behind its U.S. counterparts, which have hit a series of record highs this year,” according to Bloomberg. “The year-to-date gain for the S&P/TSX is just 4.4 percent versus 15 percent for the S&P 500. Canada still lags most developed markets, ahead of only Israel and Australia, according to data compiled by Bloomberg. Canada’s stock underperformance came, ironically, as its economy outpaced its Group of Seven peers with 4.5 percent growth in the second quarter.”

EWC has a trailing 12-month dividend yield of almost 1.7% and a three-year standard deviation of nearly 14.5%. The Canadian dollar is higher by 4.5% this year against the U.S. dollar.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.