Why Canadian Stocks Are Considered ‘Super-Cheap’ Right Now
Financial experts are advising investors to consider the Canadian equity market as an attractive option due to its lower valuations. As interest rates continue to rise, these experts believe that Canadian stocks have not yet fully adjusted to the new environment, presenting potential opportunities for investors.
According to David Rosenberg, a Bay Street veteran and founder of Rosenberg Research, the S&P/TSX Composite Index offers one of the highest yields globally, attracting investors with its all-in equity yield of 16%. Rosenberg suggests that those who have been involved in the US market should consider reallocating their investments to the Canadian market, which he describes as dirt cheap.
Rosenberg also suggests another strategy for investors to navigate a high-interest rate environment: parking their money in cash holdings. He acknowledges that the return on cash holdings may be lower compared to the Nasdaq 100, for example, but emphasizes its value as a defensive measure. During times of market volatility and uncertainty, having cash on hand can provide investors with a sense of security.
In addition to cash, Rosenberg points to long-term bonds as a viable option, particularly as concerns grow about a potential recession. By investing in government bonds, investors can hedge against economic downturns and benefit from their safety.
While Rosenberg focuses on cash and bonds, Ed Devlin, founder of Devlin Capital and former head of Canadian portfolio management at PIMCO, echoes his sentiment. Devlin, too, believes that the equity and credit markets have not yet fully adjusted to high rates and recommends cash and government bonds for safety.
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In conclusion, financial experts are urging investors to take advantage of the Canadian equity market’s lower valuations and potential opportunities. By reallocating investments, parking money in cash, or considering long-term bonds, investors can navigate the current high-interest rate environment and potentially benefit from the market. However, it is crucial for investors to evaluate their risk tolerance and consult with financial advisors before making any investment decisions.
