Canada a ‘Good Place to Hide’ If US Stocks Drop, Contrarian Says

Canada’s stock market — where returns have lagged the US for two straight years — might offer investors protection against a downturn in US stocks, a Toronto-based asset manager says.

Relatively low valuations and a lack of market froth make Canada “a good place to hide” if there’s a correction in US tech stocks, said David Picton, chief executive officer of Picton Mahoney Asset Management, which has C$12 billion ($8.3 billion) in assets under management.

It’s a contrarian call even on Toronto’s Bay Street, where traders have been bracing for volatility as the country faces tariff threats from US President-elect Donald Trump. Still, Picton says Canadian indices are an attractive option.

“The market is certainly cheap and as the global economy gets better, Canada tends to have a pretty good beta to emerging economies with less of the geopolitical risk,” Picton said. He is also holding more alternative assets, as he sees problems in both the stock and bond markets.

In a report published Wednesday, Picton Mahoney said there is a growing US equity bubble concentrated in large-cap stocks, including heavyweight tech names, joining other investors who have warned about the sector being overvalued. Oaktree Capital Management’s Howard Marks recently raised concerns about investor exuberance, hype around artificial intelligence and what he sees as an overreliance on a handful of outperforming stocks in the so-called Magnificent Seven.