U.S. vs. Canada: Comparing Equity Market Returns and Benchmark Sector Weightings

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The economy of Canada is mainly natural resources based whereas the US economy is well diversified. Accordingly materials and energy are two of the major sectors in the benchmark TSX Index. The following chart shows the total returns and sector weights in the benchmark index of Canada and the US:

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Note: The data shown above is of May, 2019

Source: A Northern View: 10 Years into a Canadian Bull Market, Franklin Templeton

Financials account for nearly one-third of the TSX Index but in the S&P 500 their weightage is just 13%. Compared to Canada, the combined weightage of Materials and Energy equals only 7.5% in the S&P 500.

Canada is a NOT a technology powerhouse and hence IT has a low weight in the TSX relative to over 21% in the US,

On Total Return basis, Canada has underperformed the US for the period shown.

Related ETFs:

  • SPDR S&P 500 ETF (SPY)
  • iShares MSCI Canada Index (EWC)

Disclosure: No Positions

Corporate Tax Rate Cut Propels Indian Stocks

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The Indian economy is in a severe slowdown with the latest GDP falling to just 5%, the lowest in five years. Unlike developed countries’ GDP rate, 5% is considered a low rate for India since it is an emerging market and has been growing at a much higher rate like 7% or more. With the economy stagnant, job growth is almost zero. Many industries are suffering and the highly important auto sector saw the decline in new auto sales for the 10th month in a row in August. Auto sales have crashed by 41% the highest decline in the past two decades.

To arrest the further crisis in the economy, past Thursday the corporate tax rate was slashed from 30% to 22%. This dramatic action should help companies as they stand to save in taxes paid and more importantly this policy change is expected to spur investments leading to economic growth again.

Indian stocks as represented by the benchmark Sensex soared by 5.3% on Friday. It remains to be seen if this tax cut leads to additional gains in equities in the coming days.

The following chart shows the YTD return of Sensex Index:

Click to enlarge

Source: Google Finance

A handful of Indian companies trade on the US markets. The complete list of Indian ADRs can be found here.