Canadian stocks are trading at a discount to U.S. stocks not seen in about 20 years.
That’s a big reason why Bank of America believes investors should be favouring stocks north of the border over their overheated U.S counterparts.
by Michael Bellucci, Bloomberg News, with assistance by Erik Hertzberg, and Aoyon Ashraf
Investors seeking to capitalize on economic reopening should look north of the border for a cheaper alternative to the “frothy” S&P 500, according to strategists at Bank of America Corp.
Canada’s S&P/TSX Composite Index has plenty of exposure to commodities and cyclical companies, while also trading at its steepest discount to the U.S. benchmark since the tech bubble more than 20 years ago, equity strategists led by Ohsung Kwon told clients in a note.
The valuation gap “is overdone, especially when the composition of the TSX is much better positioned to benefit from the global economic recovery, which we believe is intact,” Kwon said, adding that a discount of that size is usually an omen of TSX outperformance.