Why go global with investments

Canada’s equity market is strong, particularly in the three biggest sectors: financials, materials and energy sectors.

That was the first message from Sadiq S. Adatia, chief investment officer and portfolio manager with Sun Life Global Investments, speaking at Sun Life Global Investments’ National Road Show in Toronto last week.

“So far, we’ve had a decent market this year,” he said. “The TSX has been one of the best-performing markets this year. Canadians equities are off to a strong start.”

Bonds are doing pretty decent, too, which is a surprise, said Adatia. “When yields go down, that’s actually helping bond returns.”

But when the rates go up, it will put pressure on yields to go up, he continued. “It won’t be a devastating bond environment, just slower.”

Despite a decent performing equity market, Adatia’s second message was that institutional investors will need to invest outside of Canada to gain exposure to other sectors.

In the United States, companies are more willing to reinvest cash in their business and the job market is continuing to recover, he explained.

The U.S. homeowner is on a more stable financial footing, too. People are feeling confident about the markets and the economy, said Adatia. “The U.S. economy and the equity market still have legs to move forward.”

The eurozone is improving despite still facing a number of challenges such as unemployment (just under 12%) and high consumer debt levels.

There has been economic growth, albeit minimum, in the eurozone over the last three quarters. “GDP growth has gone from 0% to 0.5%,” he said, adding that unemployment needs to come down and jobs need to be created for growth to improve.

Despite the challenges, Adatia recommend that institutional investors should still consider investing globally in order to Increase their allocations to sectors not readily available in Canada.