Why Emerging Markets Offer Opportunity

December 29, 2016

Tyler Mordy is president and chief investment officer of Toronto-based Forstrong Global, an asset allocation firm known for its big-picture outlook. He’s also one of the speakers at next month’s Inside ETFs conference, and will present “Supercharging Your ETF Practice: 5 Keys to Striking It Big in Canada” at the conference. He spoke with ETF.com about the global risks faced by investors and the opportunities to be found in international markets.

ETF.com: Are there any big concerns about the Canadian markets right now? Any red flags?

Tyler Mordy: The market's seen really good performance in 2016, but we're still at a very different stage of the cycle now. In the post-crisis period, you learned that the country that deleverages fastest, wins. And currently that's the U.S. In Canada, we've had a bit of a change from macro tail winds to head winds. The star has fallen a little bit.

There have been several macro head winds that have surfaced, including a fragile housing market. We just hit a household debt record of $2 trillion, representing liabilities of over 100% of GDP; so, larger than the economy. There's pretty weak private sector job growth. And of course, the big one is the end of the multiyear uptrend in commodity leadership. Those are all sort of weighing on the outlook for Canada.

We have a newly elected anti-austerity prime minister, Justin Trudeau. He's sort of revived hopes that Canada can regain its former glory, funded in part by what he calls “responsible deficits.” This is another example of another leader on the world stage being elected based on more of a fiscal-stimulus-type program. He's definitely engineered some optimism in Canada, just like Trump has done in the U.S.

But I think the more important story for Canada is the ongoing commodity bear market. I think there's more downside risk than upside risk at this stage. And Canadians continue to be overexposed to domestic assets. That's kind of going into reverse now. You can see a lot of Canadians, and even our new clients, coming to Forstrong to embrace global diversification.

 

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