Low Growth Doesn’t Translate To Returns


    Investors in Canada need to keep three things in mind, says Roger Aliaga-Díaz, a senior economist with the Vanguard Investment Group. One is that low growth does not translate directly to equity returns. It’s not a one-to-one relationship especially because markets are forward-looking and trends and equity valuations are already priced in. As well, many investors look at countries such as Canada as a way to gain exposure to underlying commodities, but it’s important to keep in mind that investing in equity markets of those countries doesn’t mean gaining exposure to the underlying commodities. The correlation of equities in Canada to equities in the rest of the globe and in the U.S. is much higher than the correlation with equities to commodities. As a result, investors may get much less diversification than they were expecting when they use these strategies. Finally, they need to keep “a long-term perspective,” he says. It’s very difficult to time the movements in commodity prices and it’s important to keep in mind long-term goals and maybe focus on costs which can be controlled in the short term.