Don't Dismiss Down-and-Out Canada

About three years ago, I wrote an article about the iShares MSCI Canada Index Fund(EWC Quote), saying how not to analyze single-country funds. I also talked about the virtues of investing in Canada and setting reasonable expectations. Now is a good time to revisit that thesis.

Foreign diversification can provide benefits but can't protect you from a global downturn. Canada is a resource-based economy, compared with the U.S., whose economy is driven by services. Canada is a surplus country, whereas the U.S. is a deficit nation.

These sorts of differentiators create the possibility of owning a country (Canada) that is on dissimilar stock-market and economic cycles. In looking at the chart at the bottom of this story, you can see that Canada, as measured by EWC, peaked in May 2008, seven months after the U.S. and iShares MSCI EAFE Index ETF(EFA Quote), representing Europe and Asia, hit a high. There were several other commodity-based countries, like Norway and Brazil, whose equity markets also rose to records seven to eight months after the U.S. ...