Buy the CAD Dip: Why Canadian Assets Are a Contrarian Gem in 2025

The market is panicking over U.S. tariffs, but here's what it's missing: Canada's economy isn't just holding its ground—it's quietly building a fortress. April's GDP print of 0.1% growth, fueled by energy and construction sectors, isn't a fluke. This is a signal that Canadian resilience is underappreciated, and the Canadian dollar (CAD) is ripe for a rebound. Contrarians, take note: now is the time to pile into CAD-denominated assets.

The Numbers Tell a Story of Strength

Let's start with the headline: Canada's GDP grew by 0.1% in April 2025, even as U.S. tariffs rained down. Critics will cite February's 0.2% contraction, but they're missing the bigger picture. The energy sector—Canada's economic backbone—remains a powerhouse. Despite a 10% tariff on energy exports, oil and gas extraction output surged in March, with oil sands production up 1.4% and offshore crude extraction rebounding after a February disruption. Meanwhile, support activities for mining and oil/gas jumped 3.6% in March, a clear sign of sustained investment.

The construction sector isn't faring badly either. Residential building construction hit its highest level since November 2023 in March, with single-family home starts up 1.3%. Non-residential projects, like industrial and public infrastructure, are booming too. This isn't a coincidence—it's a deliberate pivot toward domestic and non-U.S. markets.

CAD: The Undervalued Currency

The CAD has been sold off on fears of U.S. tariffs, but this is a buying opportunity. The CAD/USD rate has dipped to 0.76, near its lowest since 2020. Yet Canada's trade data tells a different story: exports to non-U.S. markets surged 24.8% in March—the largest increase on record. China and the EU are snapping up Canadian energy and goods, offsetting U.S. headwinds. Meanwhile, Canada's current account surplus remains healthy, and its fiscal position is stronger than most.

The Bank of Canada (BoC) isn't panicking either. While the U.S. Federal Reserve hikes rates, the BoC has held steady, keeping rates at 4.75% since January. Why? Because inflation is tamed at 2%, and the CAD's weakness has actually helped exporters. A stable BoC policy means CAD-denominated bonds are a stealthy play for yield hunters.

Why Now? Three Contrarian Plays

1. Canadian Bonds: The Safe Harbor
   The BoC's rate stability makes Canadian government bonds a steal. The 10-year CAD bond yield is at 3.5%, far above U.S. Treasuries. Pair this with the CAD's undervalued status, and you've got a double win: rising CAD and steady yields.

2. Energy ETFs: Riding the Resilience
   The energy sector's resilience isn't just about oil—it's about diversification. The iShares S&P/TSX Capped Energy ETF (XEG) holds giants like Suncor and Cenovus, which are ramping up production in untapped markets. With global energy demand soaring and Canada's export pivot, XEG is primed for a rebound.

3. CAD Equity ETFs: A Play on Underappreciated Value
   The iShares MSCI Canada ETF (EWC) gives exposure to Canada's top companies, from banks like Royal Bank (RY) to tech darlings like Shopify (SHOP). These stocks have been beaten down on CAD fears, but their fundamentals are strong. A CAD rebound will supercharge their dollar-denominated returns.

The Tariff Threat? Overblown

Yes, U.S. tariffs are a pain, but they're not the end of Canada's story. The auto sector's 31,000 April job losses are temporary—they're a correction to overcapacity, not a collapse. Meanwhile, Canada's countermeasures (like tariffs on U.S. steel and bourbon) are forcing U.S. businesses to rethink supply chains. This isn't a trade war—it's a reset, and Canada's diversified economy will win.

Final Call: Buy CAD Before the Crowd Does

The CAD is undervalued, Canadian bonds offer superior yields, and key sectors are firing on all cylinders. This isn't a bet on Canada's past—it's a play on its future. The BoC won't cut rates anytime soon, and the CAD's rebound is inevitable as global investors realize Canada's resilience.

Action Items:
- Buy Canadian government bonds (e.g., BMO Canadian Bond Index ETF (ZAG)).
- Load up on XEG to capture energy's global play.
- Go long on EWC for broad equity exposure.

The crowd is scared. You shouldn't be. This is a contrarian's dream—Canada's economy is stronger than it looks, and the CAD is a currency waiting to shine. Don't wait for the headlines to turn—act now.

The time to buy Canadian is now.