Asset manager says now is perfect time to rebalance well-diversified portfolio
Canadian stocks have been released from the NAFTA shackles, meaning it’s a good time to bring the portfolio weight back in line with the US.
That's the view of Nader Hamid, of Total Wealth Management Group, who said yesterday’s new trade agreement represented no major overhaul from the original US-Canada-Mexico deal, although the changes to the diary trades and exemption from auto tariffs were important developments.
The portfolio manager expects the previously flat Canadian markets to get a boost simply from the fresh clarity and believes this will encourage more investment into the country and from local businesses; both of which should assist the economy, growth and, ultimately, the stock market.
Montreal-based Hamid explained how over the past 30 years the market has been in sync with the US economy but that lately there’s been a big divergence.
He said: “If that gap closes, I think we could see a good opportunity for a diversified Canadian portfolio. Canadian businesses and the economy were doing really well and it was just the uncertainty that was pushing down stock prices and the market in general, so hopefully with the cloud clearing we will see stocks and companies get back to the value they should have been.”
Hamid said that now is the ideal time to rebalance and reshuffle – not go overweight or sell - the portfolio to bring Canadian weighting to a more equal level compared to US.
He said: “If you’ve held a well-diversified portfolio over the past two or three years, the US markets increased significantly more than the Canadian market. Just from that standpoint, you are way off balance because the Canadian market has done nothing, the international markets have done not much and US has gone up. So it would be a good time to get those weights back to even.
“I wouldn’t say overweight or sell off other stuff to buy but it would be a good idea to rebalance the portfolio because the US has increased so much vis-à-vis the original weight to Canada.”
Hamid did not believe the new deal will change the pace of interest rate hikes from the Bank of Canada and offered a note of warning over the control he still believes President Donald Trump has over proceedings.
He said: “We’re not fully in the clear yet, just because the US still has power over Canada. They didn’t lift the aluminum and steel tariffs for example, and it’s not part of the agreement. They could create trade action and the US could retaliate with trade actions if they wanted to in the future. But the main uncertainty has gone.”
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