In the month of March, Canadian investors funneled $11.8 billion into U.S. Equities. These strong flows followed $12.3 billion of U.S. equity purchases in February. Canadian investors have long-appreciated the U.S. equity market for a multitude of reasons; the depth and breadth of the market, diversification benefits, and geographically reducing the age-old ‘home-bias’. As we continue to march toward the end of COVID-19 as we know it, there is another factor making the US market very attractive to Canadian investors – currency.
Since its most recent high in March 2020, the USD has depreciated approximately 17% against the CAD. As movement in foreign exchange rates is a complex matter, we will focus on the key takeaway: the Canadian dollar is currently strong relative to its US counterpart, which we believe presents a great opportunity to go shopping for high quality US companies.
As we progress through COVID-19 as a society and come out on the other end of the resulting recession, we are beginning to see signs of a strengthening US economy. During periods of economic strength, interest rates tend to rise as money supply tightens. All else being equal, this can result in the USD marching higher.
In the chart below we have highlighted the currency movements of USD/CAD through the great financial crisis and the subsequent recovery.
Investors with Canadian Dollars can view this as a very attractive opportunity to purchase US securities, which are denominated in USD. With a stronger purchasing power in CAD, investors would not only gain access to the deepest and most liquid market, but they also can benefit from a strengthening USD as we return to a ‘pre-pandemic’ state.
Reference Dates and USD/CAD Prices: yahoo finance
$1.2895 – March 11, 2009
$.9432 – July 27, 2011
$1.4578 – January 18, 2016
$1.45 – March 20, 2020
$1.20 – May 25, 2021
 Source: https://www.investmentexecutive.com/news/research-and-markets/canadian-investors-continue-u-s-stock-buying-binge-statscan/
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