Martin Pelletier: Markets haven’t kept pace with GDP rebound – FINANCIAL
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Martin Pelletier: Markets haven’t kept pace with GDP rebound

A worker welds a propeller core at the Osborne Propellers Ltd. facility in North Vancouver. Canada's economy scraped out some growth in 2015.

David Rosenberg offered some good insight on the current economic situation in Canada via his column ‘Canadian economy not so dead, after all’ earlier this week.

In particular, as the GDP change was slightly negative in the first half of this past year it has since posted a decent recovery thanks to strong consumer spending and the impact of the falling loonie. Much more, Mr. Rosenberg adds some additional perspective by pointing out which more than two-thirds of Canadian GDP escaped 2015 without a negative quarter.

This gets really interesting when you plot the S&P TSX performance within the original quarterly GDP chart. As you can clearly see, the Canadian equity market roll over corresponded with the contracting mid-year GDP figures.


Since then, however, stocks haven’t participated using the recovery of the broader economy therefore, representing a good investment opportunity in our opinion. In comparison with our neighbours towards the south, Canadian GDP is finally back on track and even likely to match U.S. economic growth this quarter and could possibly exceed it later this season.

We wonder if financial markets are beginning to wake up for this trend as the U.S. dollar is over 3.2 per cent this year from the loonie and also the S&P 500 is down over 5.8 per cent in Canadian dollar terms. This compares to the S&P TSX that is fairly flat being down only 0.3 per cent.

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