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Bearing testimony to global growth worries, the developed economy of Canada slipped into a technical recession in the first half of this year. It was not entirely unexpected, though, given the prolonged pain in oil prices. But the drop-off was the steepest since the Great Recession which rings a panic alarm for those interested in Canada investing. Canada’s economy shrank 0.5% in Q2 (annually) hit by lower energy prices and business investment. Prior to this, the economy had retreated 0.8% in Q1. Canada is among the world’s top 10 oil producers. This data is self-explanatory of the economic underperformance. Is It All Dark About the Economy? All is not unwell with the Canadian economy as GDP growth in June, or the last month of the second quarter, was 0.5% which was the largest monthly advance in the Canadian economy in over a year. Notably, June saw a considerable rise in almost each sector. A subtle bounce in oil prices was basically the savior. Apart from the energy sector lull, the Canadian economy expanded in the second quarter, bolstered by increased consumer spending. A few economists expect a sharp snap-back in the second half of the year and forecast growth of 2.5% by the end of 2015 (per the economist Brian DePratto). Investors should note that though the fresh round of global growth worries induced by China weigh more heavily on oil prices, several analysts projected a recovery, though choppy, in oil prices in recent times. Many are of the opinion that oil prices are close to hitting the bottom and may be due for some way up in the coming days. Plus, the nation’s job picture is quite stable and the inflation rate touched a seven-month high in July. Housing market too is no less than decently growing. Stronger export competitiveness due to the falling Canadian currency relative to the greenback and the increasing purchasing power of the U.S. consumers are other upsides for the Canadian economy. So, things are tied between possibilities and perils with oil prices playing a crucial role in deciding the fate of the Canadian economy going forward. Due to the above-mentioned bullish attributes, several investors can take advantage of the cheaper valuation of the Canadian stocks and the related ETFs. ETF Options The largest ETF on Canada is the iShares MSCI Canada ETF (NYSEARCA: EWC ), which is off 18.4% so far this year. The fund has a Zacks ETF Rank #3 (Hold) and might open up intriguing opportunities for the future, if analysts’ affirmative predictions come true. The Guggenheim Canadian Energy Income ETF (NYSEARCA: ENY ), being an energy-oriented ETF, shed the most this year. ENY was down over 32% in the year-to-date frame but added over 3% in the last five days (as of September 2, 2015) on the August-end global oil price recovery. Small-caps are other interesting options to play any rebound in the Canadian economy. Small-cap ETF, the IQ Canada Small Cap ETF (NYSEARCA: CNDA ), is down about 27% this year. However, CNDA has a Zacks ETF Rank #4 (Sell). Original Post Scalper1 News
Scalper1 News