In a predominant shift in the economic relationship between Canada and the U.S., Canada is, for the first time on record, a creditor to the United States.
Since 1990, the amount of assets held by U.S. interests in Canada is exceeded by the amount of assets held by Canadian interests in the U.S. Historically, it has been the other way around, with the U.S. funding according to Bloomberg.
At some points in history, many Canadian citizens were unhappy with the amount of U.S. ownership of corporations in their country.
The current economic conditions in Canada have driven investors to look elsewhere for a quality investment.
As the U.S. dollar continues to strengthen the investments, they will also continue to grow for the Canadians. Canada’s net amount of assets in the U.S. in the fourth quarter was $61 billion, which is the first time that this number has ever been positive, according to CBS News. In comparison, U.S. investments in Canada are declining with direct investment falling dramatically.
Realistically, for an investor, this means there is nothing to worry about as long as investments are domestic. This deficit says more about the Canadian economy than the United States’ poor investment opportunities have forced many investors in Canada take their money out of the country according to Bloomberg.
The decline of oil prices has hit Canada very hard and their unemployment rate is rising rapidly, now at 7.3 percent reported The New York Times. This is the highest rate since March 13, 2013. A bright spot was Canada’s improved manufacturing job market, which was the only sector to add jobs in the last quarter.
A contributing factor to this increase in jobs is the depreciation of the Canadian dollar which spurs exports.
The Organization for Economic Co-operations and Development cut Canada’s annual expected growth rate .06 percent to 1.4 percent for 2016, Bloomberg reported. In comparison, the U.S.’s growth rate is projected to be 2 percent. Canada will need its manufacturing sector to lead the way out of the current economic slump.
According to CBS News, this increased Canadian investment in the U.S. also provides some insight into the U.S. economy.
The recent rate hikes from the Federal Reserve are leading many investors abroad to see the U.S. as a much more attractive market.
In addition, the strength of the U.S. dollar has become a factor in attracting investors to the U.S.
Many investors are actively lessening their exposure in Canada due to the volatility of their economy. When looking to invest this week it is vital to take a page out of Canada’s book and stay domestic with U.S. money.
Data has shown that suggests a reluctance to acquire Canadian assets, even though the Canadian dollar is weaker than the U.S. dollar right now, according to The New York Times.
Direct investments from the U.S. into Canada have fallen over the past year, while portfolio investments have been little to change in the past two decades.
Economists predicted and reported to Bloomberg that Canada will unexpectedly be rising in the second quarter of 2016.
Editor’s Note: Information from The New York Times, Bloomberg and CBS News was used in this report.