{"id":1055,"date":"2024-03-19T13:02:00","date_gmt":"2024-03-19T16:02:00","guid":{"rendered":"https:\/\/www.bellvest.ca\/family-wealth-nova-scotia\/resources\/whats-holding-canadas-stock-market-back\/"},"modified":"2025-09-02T12:40:46","modified_gmt":"2025-09-02T15:40:46","slug":"whats-holding-canadas-stock-market-back","status":"publish","type":"resources","link":"https:\/\/www.bellvest.ca\/family-wealth-nova-scotia\/resources\/whats-holding-canadas-stock-market-back\/","title":{"rendered":"What’s Holding Back Canada’s Stock Market?"},"content":{"rendered":"
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\u201cCanada has a productivity issue and it has a competitiveness issue.\u201d<\/span><\/em><\/h3>\n

\u2014 Brian Porter<\/span><\/h3>\n<\/blockquote>\n

<\/p>\n

U.S. markets have continued to exceed expectations, leaving Canadians enviously watching as domestic investment opportunities struggle to find their footing. As we outlined in a recent article, home-bias investing can dampen portfolio performance.<\/p>\n

The question for today, however, is simple\u2014what\u2019s holding Canada\u2019s stock market back?<\/p>\n

Overconcentration vs. Diversification<\/h3>\n

We could spend weeks prying into individual businesses, but the problem facing the Canadian market is bigger than any single corporation\u2014the nation is overleveraged to stocks related to banks and natural resources.<\/p>\n

Overconcentration, the opposite of diversification, is rarely a good thing, and our markets are not the only ones with this habit. Across the border, technology and healthcare dominate the U.S. markets.<\/p>\n

If both sides are guilty, how come one is significantly lagging behind the other?<\/p>\n

Boring Stocks, Exciting Stocks\u2014They’re Still Stocks<\/h3>\n

As we\u2019re sure you\u2019ve heard, artificial intelligence has dominated the conversation lately. \u201cThis company exports petroleum\u201d just doesn\u2019t have the same allure as \u201cthis software will change the world while doing your homework for you,\u201d sadly.<\/p>\n

We can categorize them as \u201cnew\u201d and \u201cold\u201d economies. The S&P 500 likes the new, shiny products hitting the shelves, with 43% of its weight going towards technology and healthcare. Comparatively, these sectors only make up 9% of the S&P\/TSX, which is dwarfed by financials and energy, which claim 48% of the index.<\/p>\n

Boring, exciting, old, new\u2014these are all just words. In more technical terms, the S&P 500 leans towards growth companies<\/em>, and the composite index finds itself more at home with cyclical\/value stocks<\/em>. Like any well-managed portfolio, however, there\u2019s room for both.<\/p>\n

Explaining Divergences<\/h3>\n

Understanding the key differences may help us glean some insights and potential lessons, as reported by The Financial Post<\/a>:<\/p>\n