Canadian stocks are going to continue outperform U.S. equity issues in the coming year, according to a new report from National Bank Financial.

In the report, NBF notes that since the beginning of the year, the S&P/TSX composite index has returned almost 7%, compared with just 0.2% for the S&P 500. It notes that the gains in the Canadian dollar this year guts the U.S. return even further for Canadian investors.

NBF expects this disparity to persist. “We believe Canadian equities are poised to continue outperforming their U.S. counterparts because the earnings growth prospects for Canada are better than the U.S.,” it says. “Every single one of the 10 S&P/TSX sectors are expected to show superior earnings growth to that of the corresponding U.S. sector. The last time we witnessed such a situation was early 1995.”

“The fact that those estimates have been upgraded most of the time during the past 12 months adds to the reliability of the consensus,” NBF notes. The brokerage firm notes that its estimates for 2005 S&P/TSX composite earnings is slightly lower than the consensus because of the negative impact of the higher loonie on earnings.