Canada Stocks Holding Up Better Than U.S., Europe | ETF Trends

The continuing war in Ukraine and record-high inflation, among other factors, have been battering markets both domestically and abroad. While stocks in the U.S. and overseas have been whipsawed, Canada-focused securities have been facing a little less volatility.

The S&P 500 has dropped nearly 16% since the beginning of the year. By comparison, the S&P/TSX Composite Index has declined by roughly 5% year-to-date.

Canadian securities  which are typically not included as part of other developed markets funds or indexes  have also been faring better than those in other developed markets. During this period, the MSCI EAFE Index has plunged nearly 18%.

“Advisors are often underexposed to Canadian stocks if they gain developed markets exposure using MSCI Index based strategies,” says ETF Trends’ head of research, Todd Rosenbluth. “Canadian stocks are holding up better than the S&P 500 Index than many other developed markets due to higher exposure to energy and materials stocks.”

Since some popular developed markets funds exclude Canada, investors looking to increase their exposure to Canadian stocks may want to consider the Franklin FTSE Canada ETF (NYSEArca: FLCA). This single-country ETF seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Canada Capped Index, a market-capitalization weighted index representing the performance of Canadian large- and mid-cap stocks.

Finance companies make up nearly 40% of the holdings in this ETF, while industrial services comprise nearly 12%. Energy minerals, meanwhile, make up nearly 11%. The top holdings in this basket of 53 stocks are Royal Bank of Canada (8.45%), Toronto-Dominion Bank (7.77%), and Enbridge Inc. (5.02%).

FLCA is part of a series of single-country ETFs that Franklin Templeton began rolling out in 2017. The fund has an expense ratio of 0.09%.

For more news, information, and strategy, visit the Volatility Resource Channel.