2017 Currency War Part 2 Danny Popescu 09/22/2017 1,209 146 Comments Good day, In my last commentary, I wrote about the impact the loonie’s rapid appreciation has had on Canadian investors holdings US securities. While the S&P500 has climbed roughly 13% year-to-date, the rapid rise in the Canadian dollar has eroded nearly all such gains. Prior to 2017, the Canadian dollar had gradually declined against the USD for several years which had benefited Canadian investors holding American securities, but some of those profits have been given back lately due to the loonie’s reversal. It’s worth noting that even Canadian stocks listed on our very own Toronto Stock Exchange can be negatively impacted by a rising Canadian dollar against the USD. Many large Canadian companies like Financials and Technology also choose to list on US exchanges to capture a larger audience of investors. Of course, these “dually” listed companies trade in US currency on American exchanges and in Canadian dollars on our local exchanges. Below are the performance results of our 7 inter-listed Canadian stocks in one of our core portfolios. The dates of the results are noted on each graph. Each chart shows 2 results for each stock: the blue line represents the return on the US exchange and the orange line represents the return on the Canadian exchange (the results we get). For example, Magna returned 14.58% in the US while it produced 9.93% less or 4.65% on the Canadian side. An explanation for this difference in return is that every time there is a slight change between the value in the Canadian and US dollars, the traders/computers buy or sell to skim out the inefficiency — a strategy known as arbitrage. The 7 inter-listed Canadian stocks below witnessed an average return of 7.38% since May but that return declined to -1.88% in the Canadian market, partially due to arbitraging. (YCharts) While clearly, these are quality stocks which have performed well for us, the short-term currency war has impacted net results. At this stage, the strong loonie will begin to work to our advantage – weaker USD = more shares. Have a great weekend! Daniel Popescu CFP, CIM, FMA, FCSI President & CEO “I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.” Disclaimer – This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity. As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. Laws and regulations are continually changing, and their application and impact can vary widely based on the specific facts involved and will vary based on the particular situation of an individual or entity. Prior to making any decision or taking any action, you should consult with a professional advisor. The information is provided with the understanding that Harbourfront Wealth Management is not herein engaged in rendering legal, accounting, tax or other professional advice. While we have made every attempt to ensure the information contained in this document is reliable, Harbourfront Wealth Management is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is,” with no guarantee of completeness, accuracy, timeliness or as to the outcome to be obtained from the use of this information, and is without warranty of any kind, express or implied. The opinions expressed herein do not necessarily reflect those of Harbourfront Wealth Management Inc. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are not to be construed as a solicitation or offer to buy or sell any securities mentioned herein. Harbourfront or any of its connected or related parties may act as financial advisor or fiscal agent for certain companies mentioned herein and may receive remuneration for its services. The comments and information pertaining to any investment products (The Portfolios) sponsored by Willoughby Asset Management are not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units of The Portfolios is made pursuant to the Offering Memorandum or Simplified Prospectus and only to investors in Canadian jurisdictions. Important information about The Portfolios is contained in the Offering Memorandum or Simplified Prospectus available through Willoughby Asset Management. Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with investments in The Portfolios. Investments in The Portfolios are not guaranteed, their values change frequently, and past performance may not be repeated. Historical annual compounded total returns including changes in unit value and reinvestment of all distributions do not take into account sales, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Unit values and investment returns will fluctuate and there is no assurance that The Portfolios can maintain a specific net asset value. Harbourfront Wealth Management Inc. (“Harbourfront”) has relationships with related and /or connected issuers, which may include the securities or funds discussed in this commentary and are disclosed in our Statement of Policies Regarding Related and Connected Issuers. This policy is included in your new client package, on our website, or can be obtained from your investment advisor on request.