There’s a simple and somewhat depressing reason your Canadian stocks cannot seem to keep pace – corporate Canada just does not make enough money.
While the U.S. market is running lean with a capital-light, tech-rich composition that is enviously profitable, ours is a market that is capital-intensive, laden with commodities and weak in the earnings department.
Over the past 20 years, the earnings power of companies in the S&P/TSX Composite Index has declined by nearly 30 per cent against their U.S. competitors, according to data compiled by Canaccord Genuity.
So it’s probably not a coincidence that the main Canadian stock index is trading at a 30-per-cent discount. That gap is just about as high as it has ever been.
Weak corporate profitability isn’t just a drag on domestic stocks. It also reinforces the narrative that the Canadian economy is in trouble. Deep worries have arisen in recent months over the country’s poor…
