Five reasons the TSX is underperforming — again

Well, the year is half over, and the Canadian market is — to put it bluntly — sucking once again. The TSX Composite Index is up a paltry 0.6 per cent so far in 2018. Compare that with the S&P500 gain of 1.5 per cent, or the Nasdaq’s nice 8.7 per cent return so far this year. Yes, the TSX is ahead of the Dow Jones’ return of -2.2 per cent for the year, at least.

In U.S. dollar terms, the performance widens. A U.S. investor in our market this year has lost 3.8 per cent, because of the weakness in the Canadian dollar. What’s going on here? We thought the economy was strong, and corporate earnings solid. What’s wrong with our market?

Here are five reasons why our market has not done so well. Unfortunately, it is hard to envision many of these reasons changing anytime soon.

A weak currency

As noted above, international investors can lose money even when our market is actually (marginally) higher for the year. Currency plays a key role for international investors. Not just in absolute terms, but in an investor’s willingness to actually invest overseas as well. When our dollar is weak, it means less interest from foreign investors, so the TSX falters more than it would have otherwise.

Canada is not open for business 

I don’t want to get political, but recent events, such as the blocking of the Aecon takeover and the TransMountain pipeline fiasco, do send a bad message to investors, particularly international investors. If Canada is not more receptive to business opportunities, for whatever reasons, international investors will take their money elsewhere.

Not enough technology in our index 

A stat came out this week indicating that the technology sector was responsible for 102 per cent of the gains

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