The Globe and Mail reports in its Saturday edition that the "stupefyngly high"
10-year correlation between Canadian
and emerging market equities
has broken down. The Globe's Scott Barlow writes that in the past six months the domestic equity market
has climbed higher while the
MSCI Emerging Markets index
has faltered.
The bears see the S&P/TSX
composite index falling to meet
the MSCI Emerging Markets index
line on the chart. For hints on whether the new
market trend is sustainable, Mr. Barlow advises investors look at the domestic stocks that
caused the TSX outperformance
of the emerging markets index. North
America-focused Canadian Natural
Resources is the largest
positive contributor to the TSX,
followed by Enbridge and
the major banks. The biggest
detractors from the domestic
benchmark -- Talisman Energy
and Teck Resources, for
instance -- were cases where profits
were more dependent on the
developing world.
The market trend since the divergence
began in 2013 suggests to Mr. Barlow
that the Canadian equity market
is capable of continuing to outperform
the emerging markets
index. Mr. Barlow says there is no guarantee the
TSX will outperform the
emerging-market index.
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