How Do You Deal With Impact Of Currency Now?

Canadians are now more confused than ever as to whether or not they should invest in the US market. There are many factors playing in the investor’s mind at the moment. Before we tackle the currency challenge, let’s take a look at how both the US and Canadian markets did over the past 10 years:

source: Ycharts

As you can see, while the Canadian market had its moment of glory between 2008 and 2012, the US market easily crushed the Canadian market since then. The reason is quite simple; the US economy is more diversified and not dependant on natural resources. This becomes even more obvious when we look at the past 12 months:

source: Ycharts

Moving Funds to the US was the Right Move… 3 years ago

I started to build my dividend growth portfolio back in 2010. During 2012 and 2013, I invested most of my money into US dividend growth stocks. I did this move for two reasons: #1 I believed the US stock market offered better opportunities, #2 the Canadian dollar was trading at par:

source: Ycharts

The result of this strategy was simply amazing. While the Canadian market lost about 10% in 2015 and the US market was flat, my portfolio finished the year at +8.80%. This result was mainly due to the strength of the US dollar. Then again, the move to buy US stocks had to be done 3-4 years ago in order to benefit from it now.

Today, Canadian investors face a harsh reality: their stock market is tumbling as fast as their dollar. The question remains; where to invest?

Are US Stocks Still Worth It?

I have a strong feeling about the US economy.

Their stock market is well diversified and includes several companies better built than most mutual funds.

Their unemployment rate is hovering around 5% and the economy keeps cranking up more jobs each month.

New constructions are stable with over 1,1 million new homes annually.

Americans consumers represent 71% of the US GDP and they have been paying off debt over the past couple of years.

This leaves the consumer with great buying power for the years to come.