Around The World in 100 Words, February, 2019: Week 7
This week’s ATW looks at the lowly Loonie, which has had a tough go of it over the past few years. Gone are the glory days when it matched the mighty Greenback in value. Last year alone the Canadian dollar fell 8% and Canada’s 3rd largest bank predicts it could fall another 5% by year end. That article can be found HERE - leaving the Loonie at a mere 71 cents.
Why is this important? Well, for starters, Canadians import a great deal of what we consume, so a falling dollar means higher prices for goods and services. And when we travel outside of the Great White North, we are that much poorer again. The average family holiday for 4 is $5k or more, so the cost of your getaway just went up by $250. Ouch!
So what can be done? Well, in terms of willing the Canadian dollar upward, not a whole lot. Canada is at the mercy of geopolitical events and global economy that dwarf our own decision-making abilities. That said, the large wealth management companies we partner with have $US versions of their funds. Investing in these when are dollar is higher allow you to hedge against a weak Canadian dollar, and position a portion of your capital for both investment and currency-based gains. A smart move indeed.
I’ve attached a link to the Dimensional US Vector fund which is denominated in $US. This fund offers solid long term return opportunities and the upside potential of currency gains as well. A good place to start when considering CIBCs bearish outlook for our beloved Loonie.
Look forward to speaking with you about this!