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Add a period of reflation to that, a theory that BlackRock recently supported, and investors would quickly look to trade in their U.S. tech stocks for exposure to companies that would traditionally benefit from that kind of environment: banks, energy companies, gold producers and REITs.
“We’ll go right back to 2008 when the U.S. was on its knees,” said Horan, who suggested investors take a look at manufacturing stocks such as Martinrea International Inc.
Shorting stocks in Canada has a better payoff because there seems to be this perpetual gambler’s market
EHP Funds chief investment officer Jason Mann
EHP Funds chief investment officer Jason Mann has a 50 per cent weighting to Canadian stocks in his North American portfolio, but perhaps not for the reason you’d think. The fund is a long/short fund and for Mann, “shorting stocks in Canada has a better payoff because there seems to be this perpetual gambler’s market.”
Mann isn’t as high on Canadian stocks as Horan. Even if the portfolio was made up of only long positions, he said he’d likely have a split around 75/25, but he’s been growing more bullish about the Canadian side of his portfolio.
“The gap has become so wide between the high-priced growth and cheaper cyclical stocks that it’s really getting hard to ignore,” said Mann, who recommends natural gas producer Tourmaline Oil Corp. and Element Fleet Management Corp.
Mann is also betting on a rotation to cyclical stocks and a reflationary trade that may even allow the S&P/TSX to outperform the S&P 500 again. Energy may not take part in that rally due to the investor move away from “dirty energy,” he said, but the heavy weightings in banks and gold miners should be enough to lift the index over the S&P 500 in a scenario where U.S tech continues to trade sideways.