Canadian investors have completely recouped their huge losses from the great stock market panic of 2008, and as last year ended have once again begun to post sizable gains, at least on paper, from their stock portfolios, according to figures compiled by Statistics Canada.
The federal statistics agency says the value of equity holdings at Canadian households soared by $129 billion last year, thanks to rising share prices on the Toronto Stock Exchange, adding to the $194-billion increase experienced in 2009. The two increases more than made up for the $306-billion tumble during 2008, when share prices plunged following the collapse of Lehman Brothers in the United States.
The rising value of equities has helped take average household net worth to $181,700 at the end of the fourth quarter of 2010, an increase from $178,200 in the third quarter.
"The gain in the Standards and Poor’s/Toronto Stock Exchange composite index of about 9% in the fourth quarter was reflected in rising values of household equities (including mutual funds) and pension assets, albeit at a slower pace than the previous quarter," Statscan said.
While Canadians have been making money in the market, they’ve also been piling on more debt for homes and durable goods, items such as cars and furniture, according to Statscan.
Per capita debt reached $44,500 at the end of the fourth quarter, up from $42,200 a year earlier.
Canadians have also become more indebted compared with their incomes, an important metric that measures the ability of people to afford their borrowings. Household debt climbed to 147% of disposal income at the end of 2010, up from 145% a year earlier.
And although Canadians have recovered from the recession and stock market panic, at least one expert predicted the pace of asset growth will slow in the future, largely due to stagnating home prices.
While the value of financial assets may continue to rise sharply, with equities already up about 20% year-over-year so far in 2011, home prices aren’t likely to continue advancing sharply, a big factor considering homes make up about 40% of household assets, experts said.
TD said it expects households to continue to pile on debt at a faster pace than asset and income growth, suggesting that per-capita indebtedness will continue to worsen, with negative implications for the economy.
