Canadian Stocks Outperforming US Equities: A Broad-Based Rally in 2024
Canadian Stocks Outperforming US Equities with Broad-Based Rally
Canadian stocks are defying expectations this year with a broad-based rally that is outpacing the performance of equities in the US. While US markets have been driven by just a handful of names, the S&P/TSX Composite Index in Canada is showing strength across the board.
For every stock that has fallen on the Canadian benchmark, two have advanced year-to-date, indicating a strong foundation for the rally. The index, when stripped of market-cap bias, has surged 11% this year, outperforming both its cap-weighted counterpart at home and the equal weight S&P 500 Index in the US.
According to Mike Archibald, vice-president and portfolio manager at AGF Investments, Canadian investors have had more opportunity within every sector to find successful stocks. In contrast, the S&P 500 has become heavily reliant on just a few stocks, leading to concentration risk.
The dominance of a select few stocks was evident on Thursday when weakness in high-flying technology companies dragged down the entire S&P 500. Christine Poole, CEO and managing director of Globe Invest Capital Management, warned that such concentration could make the market more sensitive to negative news.
Interestingly, some of Canada’s largest firms have actually been a drag on the equity markets, with companies like Shopify Inc. and the Big 3 telecommunications stocks holding back the Toronto market-weight index.
Despite the outperformance of the S&P 500, strategists see more upside potential in the Canadian benchmark. Data compiled by Bloomberg suggests that the S&P/TSX Composite could see gains of 12% in the next 12 months, compared to 6.5% for the S&P 500.
IGM Financial chief investment strategist Philip Petursson highlighted that the TSX is trading at a significant discount relative to the S&P 500, signaling a potential catch-up in the Canadian market.
Overall, Canadian stocks are on a winning streak this year, offering investors diverse opportunities and potential for continued growth in the months ahead.