Q: There is a lot of rhetoric coming out of Ottawa about going all in to boost the canadian economy with major growth projects, reduce internal trade barriers, and mitigate tariff impact. If this in fact all comes to fruition, do you think this would positively affect canadian ETF values and would this be a good time to buy into those? VDY for example.
5i Research Answer:
There is a trade off of course between spending and debt, and Ottawa needs to be careful. Canadian productivity is low right now, and there are other signs of economic weakness. Infrastructure and other programs are typically long term deals, so there may not be a big immediated impact to corporate earnings. Earnings, and interest rates, are more likely to drive investor sentiment over the next year or so. Programs can be positive longer-term, but we would not expect a huge move here. The Canadian market is nicely ahead of the US this year, and some of any sentiment impact may already be partially embedded in valuations.