If Governor Stephen Poloz does the expected and raises Canadian interest rates on Wednesday, it may be time to load up on potash, copper and gold stocks.
A review of equity performances following Bank of Canada tightening cycles over the past dozen years shows that materials stocks including Lundin Mining Corp. and Potash Corp. of Saskatchewan Inc. significantly outperform all other sectors of the Canadian market.
Over five periods of higher interest rates, including 2010, 2007 and an extended eight-month cycle in 2005 and 2006, the S&P/TSX materials index has returned an average of 9.7 percent in the three months following a rate hike, according to data compiled by Bloomberg. By contrast, financials have gained 1.8 percent, energy has returned 0.6 percent and the benchmark index has added 2.4 percent. Continue Reading →