In today’s global market, which has been made even more accessible through the rise of ETFs, investors can go pretty much anywhere they choose and for a low price. This democratization of investing is a good thing for Canadians, because outside of residential real estate, there aren’t a lot of capital growth opportunities here.
While residential real estate investment has more than doubled in the past decade to nearly eight per cent of our total economy, investment in machinery, equipment, research and development has been nearly halved to just over four per cent. Residential construction, related services and credit intermediation are now nearly as large as our energy and manufacturing sectors combined.
Then there is business investment, which when measured as a percentage of Canada’s economy has fallen to its lowest levels since the mid-1990s, according to BMO Economics. Non-residential gross fixed capital as a share of GDP has also collapsed from more than 14 per cent to just shy of 10 per cent over the past five years whereas the U.S. has held steady at 14 per cent.
Unless Canada suddenly decides to stop speculating on housing and instead starts building out an innovative, diversified and vibrant capital market we don’t expect this to change.
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