Canadian retail savings and investments to fall in 2020 but will rebound in 2021

The Canadian retail and investments market is particularly reliant on mutual funds, which have suffered during the COVID-19 pandemic as consumers switched to deposits, according to GlobalData, a leading data and analytics company.

GlobalData expects COVID-19 to cause a 6.4 percentage point swing for Canadian retail investments compared to the previous 2020 forecast. The company forecasts the overall Canadian savings and investments market to contract by 2.3% in 2020 and expects retail mutual fund holdings to decline by 11.2% in the same year, as COVID-19 has a severe impact. However, GlobalData expects a strong bounce back, with growth of 13.2% forecasted in 2021.

Heike Van Den Hoevel, Senior Wealth Management Analyst at GlobalData, comments: “Canadians’ heavy reliance on mutual funds as an investment vehicle means the March sell-off had an outsized impact on their wealth in the short term. Many investors will be nursing losses, but stand to benefit from the 2021 rebound if they stay invested.”

Fortunately, the second most important investment class for Canadians is deposits, which observed a surge in balances as consumers entered capital preservation mode during the crisis and resulting recession. As one of few countries to have significant direct retail bond holdings, the performance of bonds will also mitigate some of the negative experience in Canadian investments in 2020.

Van Den Hoevel adds: “A proper recovery in the Canadian fund and equity market is more likely in 2021, when its closest trading partner has addressed its COVID-19 crisis and started to bounce back from its own recession.”

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