The Canadian stock market has been on a tear amid a surge in cyclical and value stocks as the nation’s economy reopens thanks to a waning Covid-19 pandemic. Energy, real estate and financials are the top gainers on the S&P/TSX this year.
Last week, the nation’s most populous province unveiled a plan to lift all public health restrictions related to the pandemic in the next six months, bringing a return to normal life into view for residents.
Foreign investors are also optimistic on the nation’s equity market. They’ve added more than $22 billion as of the end of August, thanks in part to the run in cyclicals and also due to a strong Canadian dollar. The loonie is the best-performing currency against the U.S. dollar among its G-10 peers this year, rising about 2.7%.
While the S&P/TSX has gained 22.1% this year, slightly surpassing the 21.6% advancement in the S&P 500, Canadian stocks are still cheap compared to the U.S. The price to earnings ratio for Canadian equities is about 15.8 times compared to the 21 times for the S&P 500.