North American equity markets are facing selling pressure.
In particular, Canadian stocks are being impacted by a weaker loonie, an increase in outflows to other regions and markets, and ongoing pressure on resource and commodities prices, says SW8 founder and portfolio manager Matt Skipp.
“Canada is more in the emerging market camp than most developed nations because of its resource sensitivity,” he adds. “Resources are likely to continue facing pressure as demand from China—the world’s largest importer of commodities—remains weak.”
What’s more, fund flows out of the country suggest current downward momentum will continue in the short term and weigh on Canadian equities, says Skipp. He notes that while Canadian manufacturers will eventually get a boost from our nation’s lower currency, the transition won’t happen soon.
With respect to broader market volatility, he says the pressure this year is due to markets being overbought in 2013. He also finds volatility was too low and risk was mispriced over the past year. As a result, investors will be less certain about the future of global markets in 2014.
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