Canada Becomes the Investment Destination of Choice in 2017

Current global economic trends appear to be conspiring into positioning Canada as the go-to market for safer investing in 2017. Other markets are faced with huge uncertainties due to the just concluded or upcoming elections; hence they have left many investors looking for options, and they might all end up finding Canada as a safe bet in the medium term. Having held its peaceful and non-divisive elections in 2015 and its next elections being way off in 2019, Canada becomes an automatic destination for capital flows from other economic regions in the world that are faced with the election fever currently.

Negative Investor Sentiment

Man Holding UK Flag

The populist political movements which started in Britain and led to the Brexit vote on June 23rd 2016 seem to have spilt over to other countries including the US; and it is expected to play out in the upcoming elections in France. President Trump in the US campaigned on a “Make America Great Again” slogan which he is now actualizing through protectionist economic interventions and policies. In France the leading presidential candidate in their upcoming elections this year Marion Anne Perrine Le Pen is also campaigning on the same populist ideologies; and this is increasing the fears among the investors due to this growing trend across the strongest global economic regions.

In the UK, the sterling pound was hard hit immediately after the Brexit vote and it has taken long before recovering its previous strength due to the perceived lost economic power for the UK after isolating itself from the larger European Union trading block. Due to the weak sterling pound and high rates charged through international bank to bank wires, investors in the UK will find it more profitable to transfer their funds to other investment destinations through alternative online money transfer channels. Commercial banks returns from foreign exchange business are therefore expected to fall proportionately with the expected capital flight from the UK.

A survey conducted by the Chartered Management Institute (CMI) among 1,118 managers in the UK in the month of December 2016 revealed that 65% of them were pessimistic about the economic outlook of the UK in the 2017 and the first half of 2018. These negative sentiments followed what was a tough year for most UK companies where only 39% reported to have grown. After Brexit, their economic projections deemed even further with about 49% of the managers saying that leaving the EU will have a negative impact to the UK.

Trump presidency is the highest risk that investors in the US are factoring into their investment decisions for 2017. It is not yet very clear what will come out of the radical policy changes that President Trump is proposing and which has already started initiating through his executive orders. Investors are interpreting his policy changes with mixed feelings; but majority seem to be opposed to his executive orders banning immigrants from 7 Muslim countries. In addition, his move to repeal or completely overturn the TPP and NAFTA trade agreements are seen as hostile ways to deal with strategic global trade partners. The repercussions of President Trump's protectionist approach to international trade are expected to be huge with a potential of shifting the global economic power from the US to other regions across the world.

Canadian Markets as Alternatives

All these negative developments across the major economic powers of the world are happening while Canada is enjoying a relatively calm economic atmosphere. In 2017, Canada's economy is expected to continue with its growth and hit a 2% real GDP growth; up from the 1.3% recorded in 2016 and the 1.1% growth in 2015. With this upward trajectory in economic development and its firm stand against populist ideologies being manifested in other regions, Canada will end up as a darling for the investors seeking stable returns in an inclusive market.

SP 500 and TSX Index

Investment in property across Canada as US citizens migrate into the country due to their displeasure with the Trump administration is expected to shore up property prices. In addition, as more investors move their portfolios to Canada from the global markets facing uncertainty; the stock and government bond markets in the country will also experience high demand compared to their supply and hence result to an upward rally in 2017. The combined effect of the demand for the Canadian dollar in order to move into and live in Canada as well as invest in the country will ultimately boost the value of the Canadian dollar making it stronger against other major global currencies. A stronger Canadian dollar will then make it cheaper to import raw materials for companies based in Canada; hence lowering their costs of production and translating to higher financial performance in 2017.

All odds are for Canada to experience a high growth in 2017 and present global investors with a secure investment environment and higher returns compared to the rest of the developed economies. However, to achieve this positive growth, Canada must keep off the populist ideologies being advanced by the other economic regions where it will be receiving much of the capital inflows from.

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