Ouch! Ouch! Ouch!
It sure seems like the broad stock market has been getting hit with an ugly stick since the start of the year.
- The S&P 500 was recently down more than 10%.
Investors are looking for someplace to hide. Financial media's babblers keep pushing European stocks because they're "cheap."
Maybe so. Maybe they'll get cheaper. But …
- If you want a place to invest that is riding massive, BULLISH trends, I say look north to Canada.
Why?
Because while the S&P 500 is getting crushed by surging inflation, oil prices and fears of geopolitical unrest … Canada's stock market is being buoyed by commodity prices. Particularly oil prices.
Canada is the fourth-largest oil producer in the world and fifth-largest producer of natural gas.
According to the U.S. Energy Information Agency, Canada produces 5.3 million barrels per day (bpd) of petroleum liquids and 4.2 million bpd of crude oil.
- And as oil and gas prices go through the roof, Canada's trade balance is going along for the ride.
Canada posted a trade surplus of more than 2.62 billion Canadian dollars (U.S.$2.05 billion) in January.
That beat market expectations and was the widest trade surplus since September 2008. Compare that with the U.S. trade deficit of $89.7 billion in January.
Canada's soaring surplus was measured before the February surge in oil prices. I wonder what Canada's next trade surplus will look like.
The good news is boosting Canadian stocks.
As a result, Canada's stock benchmark, the TSX Composite, is actually up this year, while the S&P 500 crumbles.
This isn't normal.
Normally, where the U.S. leads, Canada follows.
But Canada produces a lot of oil … and gas … and gold … wheat … and more! Canada produces a lot of the commodities that are going up, up, up in price.
Naturally, this is boosting the profits of the companies that produce these commodities, including plenty of Canadian companies.
Russian Substitute
Here's a fun fact:
- In 2020, the latest year for which stats are available, Canada's share of total U.S. crude oil imports increased to 61%.
And now, the U.S. is refusing to buy oil from Russia. The U.S. had been importing 7% of its oil from Russia.
As of 2021, the U.S. got about 209,000 barrels of crude oil per day from Russia, and another 500,000 bpd of other petroleum products.
Sources in Canada say that nation could crank open the taps and replace a third of the Russian oil and products that the U.S. uses.
- What's more, that could happen in just a few weeks!
So, some Canadian companies that are already doing very well with high prices could do even better if they pick up the slack for its oil-thirsty lower neighbor with 50 states.
Now, ask yourself: Do you think the inflation that is sending commodity prices tearing higher is going to cool down anytime soon? Or do you think we have higher prices — and higher commodity profits — ahead?
I say bet on higher prices … and bigger profits for our maple syrup–loving friends up north.
How You Can Possibly Consider Playing This Trend
The easiest way to get some exposure to the Canadian investment pie is the iShares MSCI Canada ETF (EWC).
The exchange-traded fund (ETF) holds everything from big banks to railroads to oil and gas companies to gold miners. It has an expense ratio of 0.7%, and shares are up 13.59% in the past year.
Alternatively, you can buy individual Canadian companies.
I'm writing about one red-hot Canadian oil pick in particular for my Wealth Megatrends subscribers for the upcoming issue.
If you want outsized gains and growing dividends, now is a great time join.
No matter what you decide on, always remember to conduct your own due diligence before entering any trade.
Best wishes,
Sean
