When everything sells off at once, where does opportunity hide?
Jeff Bradacs, CFA Co-Head Equity Strategies, Head of Portfolio Management & Trading
What does a structurally weak Canadian dollar mean for portfolios?
Neil Simons, Portfolio Manager, Head of Multi-Strategy
The Canadian dollar has been quietly telling a more troubling story than most headlines suggest. While trade tensions with the U.S. have dominated the conversation, the loonie's slide reflects something deeper.
The loonie's weakness isn't just about tariffs. It reflects deep structural problems that predate trade tensions: chronically weak productivity growth, a persistent non-energy trade deficit, a housing-driven debt overhang that is now correcting, and an interest rate differential that continues to favour the U.S. dollar.
Canada has experienced three consecutive years of sub-2% gross domestic product growth. Per-capita gross domestic product declined for two straight years before a modest recovery in 2025. These aren't cyclical wobbles, they reflect a structural loss of economic momentum.
For Canadian investors with global portfolios, a weak Canadian dollar is a double-edged sword. Unhedged foreign assets (U.S. dollar equities, global commodities, real assets) rise in Canadian dollar terms when the loonie falls, providing a partial offset to domestic underperformance. The flip side: imported goods, foreign capital equipment, and travel all cost more.
Reflexively hedging foreign currency exposure may not be a forgone conclusion. A structurally weak Canadian dollar is, in a sense, a feature for diversified Canadian investors as it cushions against domestic underperformance and amplifies returns on real assets priced in U.S. dollars. Real assets and inflation-sensitive instruments hold their purchasing power in Canadian dollar terms as the currency depreciates.
If Canadian dollar weakness begins to reflect a genuine loss of fiscal credibility and not just productivity gaps, it can become self-reinforcing. In our view, that is the scenario where a more structural shift away from Canadian dollar-denominated assets altogether may be needed, and not just currency overlay decisions.
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SUBMIT YOUR QUESTIONJeff Bradacs, CFA Co-Head Equity Strategies, Head of Portfolio Management & Trading
Geoff Phipps, CFA, Portfolio Manager and Trading Strategist
Sam Acton, CFA, Portfolio Manager, Co-Head Fixed Income
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All data sourced from Picton Mahoney Asset Management Research unless otherwise cited.
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