Typically, politics is a benign risk and often a buy catalyst. However, in the fourth quarter political risk spiked in Canada and in the U.S. from a Canadian perspective. A 25 per cent tariff on U.S. exports would be a major economic headwind as would a trade war with the U.S. Former Finance Minister Chrystia Freeland’s departure drove further political uncertainty.
Equally so, the poor financial health of the Canadian economy drove multiple interest rate cuts in 2024 adversely impacting the Canadian Dollar. While Canadian exporters benefit from a weak currency consumers and corporates will suffer an extended period of economic pain. Home bias has been costly. The Swiss Franc appreciated 23 per cent versus the loonie since 2019, the Euro is up 14 per cent since 2022 and versus the U.S. Dollar since 1971 only during the period 1998 – 2003 has the Canadian dollar been weaker. Consequently, Canadians with Euro, Swiss Franc and U.S. dollar exposure were well reward in 2024. A plethora of investment opportunities abound for those looking beyond the handful of names currently driving indexes. Given the magnetism of the Magnificent Seven to capital flows, many other quality names now trade at sizable discounts to their historical valuation metrics. Donald Trump’s second term as U.S. president will rejuvenate the U.S. corporate landscape via tax cuts and targeted investment. Robert Kennedy’s “Make America Healthy Again” drove sizable discounts for healthcare names while Trump’s “drill baby drill” thematic has implications for global energy. In non-registered accounts, on a tax adjusted basis, given declining Canadian interest rates and the net post tax yield received, equities should be favoured over fixed income.Darren Sissons' Top Picks: CSX, JPMorgan Chase and Mettler-Toledo InternationalA progressive dividend, with an annualized growth rate of 7.4 per cent since 2019, currently yielding 1.5 per cen
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