The Canadian stock market may be heading for some turbulence as NAFTA negotiations are set to begin again in Montreal from January 23 to 28. Canada also launched a trade dispute against the United States and its use of anti-dumping and anti-subsidy duties. The move comes after the U.S. Department of Commerce finalized duties on a number of Canadian softwood lumber companies, many of which were upwards of 20%.
The iShares S&P/TSX 60 Index Fund (TSX:XIU) could be a turbulent hold heading into the first months of January. The fund is up 8.2% over the past six months, but headwinds are emerging for Canada’s economy. The fate of NAFTA and the ongoing trade spat with the U.S. is not the only concern.
All six Canadian commercial banks have predicted that the Bank of Canada will move to hike the benchmark interest rate on January 17. This is after solid jobs numbers in December, a surprise rise in inflation in November to 2.1%, and improving business outlook. However, Canada is still wrestling with record consumer and household debt, a real estate market adjusting to new mortgage rules, and the prospect of slower growth in the coming years.
Some of the top holdings in this fund include Royal Bank of Canada, Toronto-Dominion Bank, and Enbridge Inc. Banks powered the surge in the TSX after record third and fourth quarter earnings in the latter half of 2017. Energy stocks have also been boosted by an oil rally that has lasted since the mid-summer.