Going Small With Our Neighbor to the North

Maintaining diversification in an international portfolio has not been an easy job over the last few years. While there are a number of opportunities in emerging markets, the picture has become far more muddled on the developed market front, as the continued uncertainty in the eurozone leaves investors and advisors understandably wary of allocating significant assets to a region facing the very real threat of widespread defaults. So where should one look in the search for opportunities in the developed world? You don’t even have to leave North America for the answer: Canada.

Canada’s position in the global commodities markets tells the bulk of the story. The country is currently the world’s fifth largest energy producer, third largest natural gas producer and seventh largest oil producer. It is also a leading producer of gold, nickel, copper and lead, as well as a major source of potash, an important component in fertilizer and thus a key part of the global food chain. 

Looking ahead, the country’s resource reserves appear strong. For example, with its 180 billion barrels of oil reserves, Canada ranks second in the world, behind only Saudi Arabia. Solid trade relationships with the United States and Canada’s status as the largest supplier of energy products to the United States also would seem to bode well for the country’s economy going forward. And this is to say nothing of the fact that while the United States has seen its sovereign credit rating hit in the past six months, Canada remains one of the few countries to have maintained its AAA rating.

Like all developed nations, Canada is not without its challenges, including the threat posed by a potential slowdown in China and the tangential risk that any nation runs should Europe not be able to pull itself back from the brink. But the country’s leaders and banking system have thus far done a commendable job of steering the Canadian economy relatively unscathed through the global slowdown of the past five years.