Opinion: Buy Canada

Shoppers are buying up Canadian-made products in favour of those produced in the U.S. and elsewhere. Trade wars have a way of drumming up that kind of behaviour.  But while many of us check for that Made in Canada tag, that’s where the buck seems to stop. There isn’t much discussion about redirecting our investment capital in a similar fashion. At least not yet.

The U.S. economy is about 15-times the size of ours. Its 2024 GDP came in at US$29.2 trillion, a 2.8% increase over the year before.

Canadian investors have shied away from domestic assets in recent years, increasing their portfolio exposure to international holdings. Most have significant exposure to U.S. equities in their portfolios. Ten years ago, 49.5% of international assets held by Canadians were domiciled in the U.S. That figure rose to 59% by the end of the third quarter of 2024.

It’s not all that difficult to understand the trend. At the end of 2024, the 10-year annualized return for the S&P 500 was 10.8%. It was 5.2% for the S&P/TSX composite index. It was 4.8% for the MSCI World ex USA, a global markets benchmark that excludes U.S. holdings.

Couple strong relative performance by the U.S. market with the strength of the greenback, and it’s clear investing in the U.S. has benefited Canadian portfolios.

Home country bias

Given the response of stock and bond investors to Washington’s aggressive new trade policies, we cannot assume that U.S. markets will continue to perform as they have historically. Add to that a growing sense among at least some Canadian investors that their money might do more good here at home.

No advisor would recommend fully divesting from the U.S., but investors can seize this opportunity to trim their allocations to that market and further diversify their holdings by investing in local economies.

It may take more research to find the right opportunities, but it’s worth it for investors looking to put their wallets to work. Financial instruments like community bonds — debt issued by not-for-profits or charities to both retail and accredited investors — can have a meaningful impact within local communities, while also making interest payments to bondholders.

For investors interested in financing projects like local affordable housing developments, community bonds can make a lot of sense for a portfolio. Tapestry Community Capital is a good resource to learn more about the community bond structure and individual projects. (Disclosure: The Inspirit Foundation has purchased community bonds from issuers supported by Tapestry. I’ve also personally purchased bonds from two issuers that had Tapestry support.)

If equity diversification is the goal, allocating capital to place-based funds could be appealing. These types of funds invest in ventures within a certain region, so investors can be confident their capital is being allocated to specific communities.

These diversified financial instruments typically project decent financial returns. The Social Venture Exchange is a resource of investment opportunities.

Your clients can also consider moving their deposits and cash management to credit unions, which often lend capital to local businesses exclusively — just another way to have more of a local tilt.

None of this is going to bring about a change in U.S. tariff policy, but a sharper focus on local economies would make a meaningful difference to our country.

Let’s invest more in us, not the U.S.