Transcript: Business-friendlier Ottawa bodes well for GDP growth
Dylan Fricker of Mackenzie Investments says Canadian companies and sectors have some interesting tailwinds
- Featuring: Dylan Fricker
- June 10, 2025 June 10, 2025
- 13:01
- From: Mackenzie Investments
iStockphoto/TexBr
Dylan Fricker
Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re talking about Canadian equities with Dylan Fricker, vice president and portfolio manager with Mackenzie Investments. We talked about sectors he’s watching and we started by asking him to describe the Canadian economy in the current moment.
Dylan Fricker (DF): Well, I think it’d be fair to say that the Canadian economy more recently has been fairly sluggish. Consumers have generally been pretty overlevered after years of abnormally low interest rates. And obviously, with the tariff situation and trade volatility coming out of the U.S., businesses are a little reticent to commit large amounts of capital anywhere, and that includes Canada. On the tailwind side of the equation, I would say Canada does finally have some egress as it relates to the energy sector. So that’s a good thing for Canada overall and tax revenues and all that good stuff. And then, of course, we’ve seen a massive surge in gold pricing. We do have some gold mines in Canada. And to the extent that they’re seeing better commodity prices, that means they’ll be paying more tax and more royalties, and that flows through to the rest of the country. So those are some of the good news stories, I would say.
Is Canada a target-rich environment for investors?
DF: I think the answer is a resounding yes for a number of reasons. I don’t think that our political environment has been as polarizing as that in the United States. People want to see stability in the capital, and they want to see a path to being able to allocate large amounts of capital accordingly. I think Canada has provided that, which bodes well as we go forward. Because I think, to be fair, we’ve had a government for the last few years that hasn’t been tremendously pro-business. So to the extent that we can be a bit more pro-business, I think Canada’s GDP growth should improve. If you just look at the list of takeovers recently, you had not just external takeovers, but even domestic takeovers. So you had:
- National Bank buy Canadian Western Bank;
- CI Financial got taken over by an Abu Dhabi buyer;
- Stelco was taken over by Cleveland Cliffs, which is a U.S. company;
- Glencore, which is a European company, bought the coal assets from Teck [Resources];
- We had an announcement of a proposal by Strathcona Resources to buy MEG [Energy Corp.]. So that’s a domestic merger. That hasn’t completed. We’ll see what happens there;
- And then, more recently, we had a bid to take InterRent.
So, I think Canada is seeing a lot of deal activity and I think, to your question, I think Canada is a target rich environment.
Sectoral opportunities in the Canadian space
DF: Outside of the banking system, the property and casualty insurance sector has probably been our favourite for quite a few years. More recently, it’s maybe a bit troubling, because, as anyone who’s paying car insurance or home insurance in this country can attest, the rate of increase on these insurance policies is going up awfully quickly. So we’ll have to see how long that can persist. But, so far, pricing remains pretty strong. And those stocks typically have shorter cycles. So if the pricing environment is strong, they can reprice pretty quickly. And so those stocks typically trade at a premium to, say, banking or life insurance. I didn’t see anything in the quarterly reporting that would lead me to suggest that the pricing is going to rapidly deteriorate. We have to keep an eye on it. We’re a bit more careful on the consumer. But we still like ideas where the consumer can save money. So Dollarama, Loblaws. They compete at the more commoditized end of the spectrum where pricing is low and consumers can save money. Now those stocks have done pretty well in the last few years. So, again, valuations have come up quite a bit. But the case for those still makes a lot of sense. We like the engineering and construction companies. Again, valuations have come up quite a bit. But the idea there is that you still have a lot of global infrastructure spending. Obviously one thing to watch there is just concerns about the size of deficits, not just in the United States, but globally. At some point, perhaps those start to slow, just because deficits have become problematic. And then beyond that we have our core staple of tech companies. We tend to focus pretty heavily on software just because it’s repeatable. And then in real estate, I still think Canadian real estate is pretty cheap. It’s maybe not the most exciting sector. But the stocks are actually pretty cheap, especially for yield-oriented investors.
And finally, what’s the bottom line on investing in Canada in the current moment?
DF: As much as I’d like to say that volatility is going to come down, I’m not 100% convinced of that. So I think equities, generally speaking, because of this trade volatility will probably also stay volatile. But I’m a Canadian portfolio manager, so I’m always bullish on Canada for good reason. Canada ranks extremely well in the global competitive picture. I think it’s going to get better with the new administration in Ottawa. So then the question is, you know, where? Where in Canada are you the most bullish? Where can you allocate capital the most confidently? And that’s, that’s the part that changes.
Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Dylan Fricker of Mackenzie Investments. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.
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