ETF News

Canada’s federal election, occurring on April 28th, will decide the pathway for the nation in the coming years. While the leadership of the leading parties, namely Mark Carney for the Liberal Party and Pierre Poilievre for the Conservative Party, have espoused distinct visions for Canada, the area of focus for many Canadians is the economy, particularly given the actions of the Trump administration.  

Though both party leaders have differing economic plans (i.e., Liberal vs. Conservative), there are shared sectors of economic importance, highlighting their significance to the Canadian economy. However, there are also unique areas of focus, highlighting net new opportunities being brought into focus. For Canadian investors, the economic agenda of each party can be seen as a guidepost towards the growth opportunities that may become available in the future, to which they can participate beneficially.

Focusing on Energy and Critical Minerals

As mentioned in a previous article, energy is a seminal cornerstone of the Canadian economy. To further grow the energy sector, both party leaders have committed to unlocking Canada’s energy potential by promising new federal offices focused on fast-tracking approvals to develop natural resources and strengthening Canada’s industrial economy.

The global demand for critical minerals is also a potential opportunity for Canada, as the nation is replete with mineral resources used in much of today’s technology. With energy security and electrification being prominent themes of our modern economy, the supply and demand pressure for the raw materials necessary to create and maintain clean-energy technologies, semiconductors, and other innovations depend on critical minerals. Both party leaders view accessing these critical minerals as foundational to Canada’s economic growth and future prosperity.

For Canadian investors looking to gain exposure to Canada’s energy sector, the following ETFs are worth consideration:

The iShares S&P/TSX Capped Energy Index ETF (Ticker: XEG) seeks to replicate the performance of the S&P/TSX Capped Energy Index, providing exposure to Canadian energy companies.

The BMO Equal Weight Oil & Gas Index ETF (Ticker: ZEO) seeks to replicate the performance of the Solactive Equal Weight Canada Oil & Gas Index, which includes Canadian securities in the oil and gas industries.

The Global X Equal Weight Canadian Oil & Gas Index ETF (Ticker: NRGY) seeks to replicate the performance of the Mirae Asset Equal Weight Canadian Oil & Gas Index, an equal-weighted index designed to provide exposure to the largest Canadian oil and gas companies.

The Global X Equal Weight Canadian Pipelines Index ETF (Ticker: PPLN) seeks to replicate the performance of an equal-weighted index, the Mirae Asset Equal Weight Canadian Pipeline Index, which is designed to provide exposure to the largest Canadian Pipeline companies.

For Canadian investors looking to gain exposure to Canada’s critical minerals, the following ETFs are worth consideration:

The iShares S&P/TSX Global Base Metals Index (Ticker: XBM) tracks the performance of global base metals producers, offering exposure to companies involved in the extraction of metals like copper, nickel, and zinc. These metals are vital for various industries, including electronics and renewable energy.

Additionally, the iShares S&P/TSX Energy Transition Materials Index ETF (Ticker: XETM) is designed to measure the performance of the equity securities of Canadian and global companies engaged in the production or exploration of materials used to enable the global energy transition.

Focusing on Housing

Canada’s housing shortage and affordability issues are well known; as such, both parties have committed to addressing this matter meaningfully. The Liberal Party announced the Build Canada Homes (BCH) entity, which will get the federal government back in the business of building homes. BCH will have three key functions: building affordable housing at scale (including on public land), catalyzing a new housing industry, and providing financing to affordable homebuilders. In contrast, the Conservative Party has stated their intention to build 2.3 million homes over the next five years. To achieve this, they will (i) Identify 15% of federal land and buildings to sell in cities within the first 100 days of a new Conservative Government, (ii) work with municipalities to pre-zone that land so builders can break ground immediately, and (iii) prioritize homebuilders who will build affordable homes, especially for young Canadians.

While there are no Canadian-specific ETFs exclusively focused on the housing or homebuilding sectors, investors can consider the iShares S&P/TSX Capped Materials Index ETF (Ticker: XMA), which offers exposure to Canada’s materials sector, including companies involved in metals, mining, chemicals, and forestry products. While not exclusively focused on building materials, it includes firms that supply essential materials for construction.

Focusing on Infrastructure

Both parties have committed to bolster Canada’s infrastructure, with projects ranging from newly built mass transit to developing trading corridors, including ports, railways, airports, highways, and other trade-enabling infrastructure. However, the Liberal Party’s economic plan makes reference to building out Canada’s east-west electricity grid, a nation-building transmission project developed with provinces, territories, and Indigenous partners, and stakeholders.  As explained by the Liberal Party, “This commitment will unleash clean growth across the country, connecting more homes and businesses to the power of clean electricity and attracting new investments in resource projects.” 

An extension of the above commitment is the party’s commitment to expand Canada’s electric vehicle (EV) charging network by supporting the building of thousands of new stations by 2027. This is noteworthy, as a February 2024 report from Natural Resource Canada noted that zero-emission vehicles are forecast to grow from approximately 480,000 today to 5 million in 2030, reaching 21 million in 2040. To support the deployment of millions of zero-emission vehicles by 2030, Canada will need to install 235,000 public charging ports.

Executing such a plan will require the involvement of utility companies building out an electricity infrastructure that can support increasing energy demands. For Canadian investors seeking exposure to utility companies, the iShares S&P/TSX Capped Utilities Index ETF (Ticker: XUT) and the Global X Equal Weight Canadian Utilities Index ETF (Ticker: UTIL) are solutions providing exposure to Canada’s utility companies.

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.