Skip to main content

The Globe and Mail

National Bank says it’s time to cut cash positions and load up on Canadian stocks

Enthusiasm comes after weak second quarter for energy stocks, banks and materials.

Canada's stock market is the weakest in the developed world in 2017, with a year-to-date gain of just 0.4 per cent. But rather than give up, consider buying.

That's the view of Stéfane Marion, chief economist and strategist at National Bank Financial. He changed his asset allocation on Wednesday, reducing cash in favour of Canadian stocks.

The allocation to cash falls to 7 per cent from 10 per cent previously, while the allocation to Canadian stocks rises to 24 per cent from 21 per cent.

Story continues below advertisement

His enthusiasm for Canadian stocks follows a weak second quarter for energy stocks, banks and materials.

However, he expects a rebound in the second half of this year, reflecting a sound domestic economy and rising corporate profits.

"Our decision is based on our view that global economic momentum will improve in the second half of the year," Mr. Marion said in a note. "This development argues for a reflation trade scenario, implying a somewhat weaker U.S. dollar and stronger commodity prices."

He also pointed out that Canada's S&P/TSX composite index is cheap relative to the S&P 500. He measures this by looking at the difference, or spread, between the two indexes' 12-month estimated price-to-earnings ratios: The spread is at its widest since 2004, with the valuation of TSX index well below the S&P 500.

Mr. Marion also lowered his allocation to U.S. stocks to 17 per cent from 20 per cent, with the difference going to foreign stocks.

Video: The pressure is on for advisors to justify their fees
Report an error Licensing Options
About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at