When you look at the details of Canada’s federal budget as it pertains to investing in Canada, there are aspects that are bullish to be sure. But when you dig down a bit, the largest part of the TSX will face some headwinds with more competition.
For banks, this means both opportunities (new market entry, product innovation) and obligations (regulatory compliance, competitive adaptation).
We see the open competition as a slight loss of market share over time, and more of a growth slower than an outright negative.
For metals and mining, more support for key minerals should be extremely helpful for growing the sector, but mining is such a highly cyclical sector that policy is not strong enough to call it bullish. It will always depend on underlying commodity trends.
Oil and gas stocks are about commodity prices too. The higher prices post-Iran war helped Canada’s revenue side significantly. The planned projects in the budget, if all executed, probably hold the best opportunities, but again, like the war increased revenues, peace will likely reduce them. Growing the sector has regulatory headwinds.
The software sector is basically two stocks and there is no exchange-traded fund (ETF) for it. Insurance rolls up into financials and there was not much in the budget that we noticed.
Summing it up from an ETF perspective, I’ve identified a few ETFs for investors to gain exposure: XFN, XEG, XBM, XGD, and XUT.
The worst performing one in the past few years has been utilities. For the yield seekers out there, it might be one of the better performers over the next few years.
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