Canada Stock Market Valuations and Expected Future Returns

Updated at Sun, 26 Jan 2020 20:30:09 -0600
Country: Canada (updated daily) check out Global Overview for detailed methodology.

Ratio of total market cap over GDP: Maximum - 190%; Minimum - 78%; current - 124%
Expected future annual return: 5.0%

ETF Used for dividend yield: EWC (Yield=2.32%)
Market Index used: TSXSP
Current Annual GDP: $1,750 billion US dollars or 2,288 in billions of national currency (GDP in Local Current Prices Annual Growth=3.26%)
Data since year 1990

Canada Historical GDP Growth

Historical GDP of Canada in billions of national currency. The GDP in local current prices has grown at the annual rate of 3.26% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $1,750 billion US dollars or 2,288 in billions of national currency.

Canada GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Canada in billions of national currency. This value is normalized using the data published by WorldBank. TSXSP is used for the normalization. Use TSXSP as index, data goes back to 2000. The index comprises about 70% of market capitalization for all Canadian-based companies listed on the TSX. Annual GDP data from IMF, back to 1990, in billions Canadian Dollar.

Canada Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Canada is 124%. The historical high was 190%; the historical low was 78%. If we assume that the ratio will reverse to the historical mean of 119% over the next 8 years, the contribution to expected annual return is -0.56%. This is the detailed historical chart of the ratio.

Canada Ratio of Total Market Cap over GDP (%)

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Canada stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the average ratio of 119% over the next eight years.

The blue line indicates the actual, annualized return of the Canada stock market over eight years. We use “TSXSP” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of Canada


The stock market of Canada is expected to return 5.0% a year for the coming years. This is from the contribution of economic growth in local current prices: 3.26%, Dividend Yield: 2.32% and valuation reverse to the mean -0.56%.

This is the projected return of the stock market in Canada relative to other countries. Click on each bar in the chart to go to other countries:

You can go here to see what international stocks Gurus are buying.

Add Notes, Comments

If you want to ask a question or report a bug, please create a support ticket.

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
/* */