{{r.fundCode}} {{r.fundName}} {{r.series}} {{r.assetClass}}

Welcome to the new RBC iShares digital experience.

Find all things ETFs here: investment strategies, products, insights and more.

About this podcast

A weaker U.S dollar and increased demand are leading reasons why stocks in oil, mining, and agriculture have rallied in recent weeks. Stu Kedwell, Co-Head, North American Equities, explains how the surge is tied to promising economic growth forecasts, and what it could mean for the broader Canadian market. [5 minutes, 45 seconds] (Recorded January 19, 2021)

Transcript

Hello and welcome to The Download. I’m your host, Dave Richardson. And it is Stu’s day! So that means we have Stu Kedwell, Co-Head of North American Equities with RBC Global Asset Management, with us for his popular visits, almost weekly.

Good afternoon, Dave. How are you doing?

Very well today. And markets are doing well. A lot of it is the familiar names that we’ve been talking about or that people talk about in technology and electric vehicles and all that kind of stuff. But I have just been looking and watching, and lo and behold, some of the areas that have been so out of favor for so many years — agriculture, mining, oil — are showing some real signs of life over the last little while. And I thought I’d check in — since «co-head of North American equities» means Canada — what are your thoughts around what we’re seeing in commodities overall?

Well, a lot of the economy that’s a little bit more economically sensitive, these stocks bottomed in the third and fourth quarter of 2020. Between a weaker U.S. dollar and signs of better demand, many commodities have done extremely well, both hard and soft commodities. The price of lumber probably led the way on the back of housing last year, but at the same time, a lot of these areas. Lumber might be a little bit unique because supply has been curtailed because of things like the B.C. pine beetle and what have you. But around the commodity universe, whether it’s corn where we had some swine flu, which really changed the pork supply, we’ve had a very strong market. Yet, even in the case of corn, I think it’s now 4$ a bushel, whereas its peak in the 2012-2013 area would have been 7 or 8$ a bushel. So, they’re well off the lows, but they could still keep going. In many respects the longer-term thesis is around broader global economic growth starting to kick into gear a little bit, at the same time as the U.S. dollar is weaker. So that’s why you’re seeing some pretty strong moves in commodities, even in things like energy. People debate the long-term demand behind energy because of climate change, which is something that we talk a lot about as well, but in the near term, where you’ve had very little capital invested in any type of near-term supply and you get slightly more demand, you can sometimes get a very much more significant price change. We’ve started to see that. You did mention electric cars, which has played into some areas quite well, like copper. When we think about renewable energy, you’re putting a new source of demand on top of the existing demand curve at a time when there really hasn’t been a whole lot of incremental supply. That could keep things a little bit tighter than they’ve been in the past. So, that’s really happening throughout many of these soft and hard commodities, sometimes for general reasons, sometimes for specific. But the commodity market has been doing better and it looks like it might stay that way.

So Stu, if we look at that from a portfolio perspective, does that suggest to people to maybe take another look at Canada or are there any other areas that people should be thinking about, given that view?

Certainly Canada gets you some interesting exposure to some of those trends. Big businesses in Canada like Nutrien, the old PotashCorp that merged with Agrium. That’s a very interesting way, with a pretty good dividend, in our minds, for agricultural exposure. Canada obviously has energy and a host of other things when it comes to basic materials. But it also really plays into emerging markets where you’ll get some exposure to this specific type of growth. But also, as the global economy picks up, they tend to accelerate a little bit faster during periods of time like this as well. It just means good things for consumption in some of those countries and all parts of their broader economies, in addition to just basic materials. Of course, we have a great emerging markets team in London for global asset management.

Yes. I had Philippe Langham and Laurence Bensafi on this podcast, and they do a terrific job in the emerging market space, large cap dividend and small cap, where they have specific areas of expertise. So particularly if you add in the weaker U.S. dollar, along with this new strength in commodities that makes emerging markets exciting. So Stu, a little bit of a shift from where we’ve been for a lot of the last 12 months, but an interesting shift, particularly for Canadian investors. As always, thanks for your time today.

Great. Thanks for having me, Dave. And thanks for everyone who listened.

Disclosure

Recorded: January 19, 2021

RBC Global Asset Management is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc., RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) Limited, and BlueBay Asset Management LLP, which are separate, but affiliated subsidiaries of RBC.

This report has been provided by RBC Global Asset Management Inc. (RBC GAM Inc.) for informational purposes as of the date noted only and may not be reproduced, distributed or published without the written consent of RBC GAM Inc. Additional information about RBC GAM Inc. may be found at www.rbcgam.com. This report is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. RBC GAM Inc. takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when provided. Past performance is no guarantee of future results. Interest rates, market conditions, tax rulings and other investment factors are subject to rapid change which may materially impact analysis that is included in this document. You should consult with your advisor before taking any action based upon the information contained in this document.

Any investment and economic outlook information contained in this report has been compiled by RBC GAM Inc. from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM Inc., its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM Inc. and its affiliates assume no responsibility for any errors or omissions.

All opinions and estimates contained in this report constitute RBC GAM Inc.'s judgment as of the indicated date of the information, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates and market conditions are subject to change. Return estimates are for illustrative purposes only and are not a prediction of returns. Actual returns may be higher or lower than those shown and may vary substantially over shorter time periods. It is not possible to invest directly in an unmanaged index.

A note on forward-looking statements:

This report may contain forward-looking statements about future performance, strategies or prospects, and possible future action. The words "may," "could," "should," "would," "suspect," "outlook," "believe," "plan," "anticipate," "estimate," "expect," "intend," "forecast," "objective" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties about general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.

® / TM Trademark(s) of Royal Bank of Canada. Used under licence.

© RBC Global Asset Management Inc., 2021