It is often said that happiness is a function of expectations. Considering the trade actions and political posturing between the U.S. and Canada earlier this year, the natural expectation was that Canadian equities would underperform. However, the reality has been quite the opposite, with Canadian equities exhibiting a compelling performance thus far in the year.

Looking at Canadian Equity Performance

The strongest sector performance within the Canadian equities asset class has been the materials sector, which includes companies within the metals and mining industry. As such, the equity performance of gold miners has been a significant contributor to the Canadian equity asset class, given that the price of gold (and silver) has reached new highs this year.

As shown in the chart, the performance of the other sectors, apart from Health Care, has been positive, with many displaying impressive double-digit returns. Given the importance of Canadian banks to the nation’s economy and the significance of the financial sector within the S&P/TSX Composite Index, the solid Q3 earnings of each institution was welcomed news. As noted by most institutions, provisions for credit losses—the amount banks set aside to cover potentially bad loans—had decreased relative to the previous year. 

Regarding consumption, as reported by Statistics Canada, although real gross domestic product declined in the second quarter due to decreases in exports and a pullback in business investments, household spending increased. Higher expenditures for new trucks, vans, and sport utility vehicles, which would impact the consumer discretionary sector, led the overall increase in household spending for the second quarter.

Gaining Exposure to Canadian Equities via ETFs

For investors seeking to gain exposure to Canadian equities, there are distinct ways they can achieve this through ETFs.

For investors seeking Canadian equities with favorable market sentiment and earning excess returns over stocks with weaker recent trends, the Fidelity Canadian Momentum ETF (Ticker: FCCM) is a single-factor solution that provides exposure to companies exhibiting positive momentum signals.

For income-oriented investors, the RBC Canadian Equity Income Fund (Ticker: RCEI) is an actively managed fund that focuses on Canadian dividend-paying companies that have demonstrated the ability to pay and grow their dividends over time.

For investors seeking a solution with a multi-factor approach, the Invesco RAFI Canadian Index ETF (Ticker: PXC) seeks to replicate the performance of the FTSE RAFI® Canada Index, which selects companies based on four fundamental factors: sales, cash flow, book value, and dividends.

Finally, for broad market exposure, the Franklin FTSE Canada All Cap Index ETF (Ticker: FLCD) seeks to replicate the performance of the FTSE Canada All Cap Domestic Index, which comprises Canadian large, mid, and small-cap stocks.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.