Despite mediocre performance from the S&P/TSX composite index and a slowing housing market, Canadians are feeling pretty good about the economy. Over a quarter, 26%, say they feel the economy will improve over the next year, while 55% expect it to remain the same, a recent TD poll found. These are surprising results, especially when Canadians are constantly reminded how indebted we are. What’s behind this shocking revelation?
Canadians aren’t just on cloud nine about the economy, they’re also feeling pretty good about their investment portfolio. Despite a rocky ride for the benchmark TSX index so far in 2013, 41% of Canadians expect their portfolio to improve over the next year, while 51% expect it to remain the same. As investors we’re constantly reminded that past performance is not an indicator of future results, but that hasn’t stopped Canadians from feeling pretty confident about the future, their investments and economy.
"Canadian investors have a positive view of current market conditions - both domestically and across North America," says Bob Gorman, chief portfolio strategist at TD Wealth. "While we anticipate moderate growth within the Canadian economy despite little change in key Canadian commodity prices, recent U.S. stock market performance is likely a factor in shaping that positive view."
Canadians seem to be taking a glass-half-full approach when it comes to their investments. In fact, Canadians who saw their portfolio do well over the last year are the most optimistic about what the next year holds. Sixty-five percent of investors who experienced gains last year expect another great year compared with 24% of investors who suffered a capital loss. Meanwhile, 30% of investors who came out ahead expect their investments to remain the same compared to 53% who suffered a loss. Only 3% of those with capital gains last year expect a decline, while only 19% of those who suffered a loss expect another losing year.
"For investors who are feeling optimistic and want to get off the sidelines, there are many options available to fit within your goals and strategies," says Kim Parlee, vice president, of TD Wealth Management. "Keep in mind that understanding the different investment vehicles, from guaranteed income products to riskier options that may yield greater returns, is an essential part of building a balanced portfolio suited to your situation and risk tolerance."
With Canadian GDP revised downward and sub-three percent GDP growth expected over the next decade, Canadians should be feeling hawkish about the economy. Instead, the majority of Canadians expect the economy to rebound over the next year. Twenty-six percent of Canadians see the economy improving this year, while 55% see it remaining the same.
When it comes to investing abroad, Canadians are a lot less positive. With Europe in the middle of a debt crisis and China’s growth slowing, only 10% of investors expect to the world economy to improve over the next year, while a whopping 42% believe its worst days are ahead.
If you’re worried about the world economy the key is diversification. By diversifying your portfolio you won’t put all your eggs in one basket. That way if resources take a hit and the Canadian economy slows, your portfolio won’t be hit as hard.