A decade in the Canadian Market

How good have Canadian stocks performed over the last decade? It’s
simple: investors would be better off investing in guaranteed government bonds
and avoiding risky and volatile equities.

A combined bond investment of provincial,
municipal and federal bonds returned 94% amid the financial crisis. But central
banks boosted economic growth due to lowered interest rates, stimulating bond
prices as they typically rise when interest rates fall.

All in all, here
are some highlights for the past decade:

Roaring stocks

The Canadian stock
market made some significant milestones in the past decade, gaining about $660
billion to blast through a $2-trillion market cap.

Canada has a
reputation for attracting ‘newest’ investment trends such as marijuana and cryptocurrency.
While the country’s oldest companies still survive and thrive, flashy investments
have always sparked early-stage winnings.

But most of the
new entrants fail – for instance, just a few months after legalising marijuana
stocks, they have dipped more than two thirds, plunging the overall market cap.

Energy stocks haven’t
been doing well either, following a move by foreign companies to pull investments
from oil sands projects amid a slump in Canadian crude versus the U.S.
benchmark due to pipeline bottlenecks.

Natural resource
and energy companies recorded the worst performances on the S&P/TSX Index in
the decade.

Dwindling listings

Over the last decade, the Canadian benchmark has experienced a dip
in the number of companies listed. But tech company listings rose during the
decade. While Blackberry never regained its former status, other upcoming tech unicorns
have been recording impressive numbers. Shopify has rallied more than 1000% since
being listed four years ago. Lightspeed POS Inc. surged
more than 60% since being listed early this year.

Bonds

The Canadian bond market was this year pushed to a decade-high by investors,
lagging their global counterparts.

Avi Hooper, a
portfolio manager at Invesco, which has $1.2 trillion under
management, said in an interview: “Canada under-performance is justified as
it’s a smaller market, so there’s less diversification of sectors.”

Portfolios containing government bonds during this past decade had
a party.

In 2009, 10-year bond yields shed more than half
to 1.66% from 3.6% following the central bank’s interest rates cut. It was around
the same time that US Treasury bonds, which moved from 3.83% to 1.93%, were established.

Looking at
the next decade, it may only take courageous investors to make such bets.