Lack of private-sector investment is at the heart of Canada’s economic, stock-market mediocrity

The Canadian stock market has an economy problem.

Over the past year, the TSX has deeply underperformed U.S. stock benchmarks, closely tracking the widening gap between the two countries’ economic growth readings. On both fronts, Canada is growing at about one-third the U.S. pace.

That’s no coincidence. The same failings sapping the Canadian economy of its vigour are also to blame for the run of shoddy performance in domestic stocks.

At the heart of Canada’s economic and stock-market mediocrity is a lack of private-sector investment.

For years, Canadian businesses have been loath to invest in things such as machinery and equipment, or productivity-enhancing research and development. Spending on those items has even started to decline in recent years.

“These are fundamentally important factors for equities,” Robert…