Enis’s Macro Wrap – Canadian Thanksgiving

by Enis October 8, 2012 7:39 am • Commentary

Today is Canadian Thanksgiving.  Our neighbors to the north celebrate the day of thanks a month and a half before us, on the same day that we celebrate Columbus Day.  I traded Canadian derivatives for a couple years, and always appreciated the day off when my American colleagues had to work (of course, that meant I had to work on actual Thanksgiving a couple times, so not all fun and games).

In honor of Canada’s holiday, take a look at the 20 year chart of the SPTSX index, the broad Canadian stock index:



While the overall chart looks similar to the SPX index, the magnitude of the bull market moves tell an interesting story.  Relative to U.S. stocks, Canadian markets did not participate nearly as strongly in the tech bubble run in the late 90’s.  Rather, the real large bull market for Canada took place in the commodity bull run that ended in mid-2008.  By that time, U.S. markets were already well below their 2007 peak, as the financial and consumer stocks were in bear markets.

The steep fall in 2008 was similar, but the recovery since then was initially stronger in 2009 and 2010 as commodity prices and Chinese-demand related markets rallied strongly.  However, since late 2010, Canada (like Brazil, Australia, or China) has substantially underperformed the U.S.

My main takeaway is that the sectors leading the bull market in the U.S. over the past couple years are health care, consumer, and technology (as opposed to materials and energy in 2007-2008), areas less important to the Canadian economy.  Only when that leadership loses its luster will U.S. markets start to feel some longer-term weakness.

Markets overnight:

  • Asia was broadly in the red (0.25-1% in most regions) in a quiet session as Japan was closed.  Europe opened in the red and has remained so all session, with SPX futures down 0.4% in sympathy
  • Commodities especially weak, with crude oil, copper and silver all down more than 1.5%.  The U.S. dollar is stronger vs. most crosses, and the U.S. bond market is closed
  • Quiet week in terms of economic data, but earnings season will pick up, with Alcoa reporting on Tuesday, and WFC and JPM on Friday