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Seven reasons Canada is rated as a ‘bastion of stability’

Economist David Rosenberg describes Canada as the True North, strong and “free of the dramatic fiscal retrenchment and tax rate increases that are going to be plaguing much of the rest of the industrial world.” In a report today, the chief economist of Gluskin Sheff & Associates cites seven reasons behind the fact that Canada “has basically been re-rated coming out of the credit crisis as a bastion of stability in an increasingly unstable world.”

  • The federal government “actually deserves” its Triple-A credit rating.
  • No Canadian bank failed.
  • Canadian banks did not cut dividends, and as a group have a dividend yield just shy of 4 per cent, compared to less than 1 per cent in the U.S.
  • The Bank of Canada is raising interest rates given the stronger economy, while its U.S. counterpart is on hold, meaning a yield premium over U.S. alternatives for investors wanting to park funds in liquid short-term securities.
  • Top marginal tax rates are already higher in New York City than in Toronto.
  • Real estate in Toronto, Montreal and Vancouver is cheap on a global comparison.
  • It’s not just about oil anymore, but also natural gas, where prices have hit bottom, and precious metals that account for 13 per cent of the TSX market capitalization.

“It was fascinating to see the Canadian dollar only correct down to 92 cents during this most recent round of global financial turbulence and flight-to-safety,” Mr. Rosenberg said. “That is a far cry from the correction down to 78 cents following the Lehman aftershock.”

Article courtesy of The Globe and Mail, original article here


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