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Potential of a US recession number one concern among Canadian investors


Canadians are optimistic about their country’s strong economic performance and financial outlook, but a BMO Harris Private Banking study found that many are anxious about how the rest of the world’s financial challenges could affect their portfolios as they approach the second half of 2012.

According to the study, almost three-quarters of Canadians (72 per cent) are worried that global economic troubles may impact Canada’s relative prosperity.

Forty-one per cent of Canadians believe that the possibility of the US slipping into another recession represents the number one threat to Canada’s economy.

Close to one-quarter of Canadians (23 per cent) feel uneasy about the sovereign debt crisis in the Eurozone.

Eight per cent of Canadians are concerned about slowing growth in China and India.

Seven per cent worry about how tensions in the Middle East may affect Canada’s financial markets.

"Though the most recent recession is a few years behind us, the tentative economic recovery in the US still troubles Canadian investors," says Paul Taylor, chief investment officer, fundamental equities, BMO Asset Management, and investment strategist for BMO Harris Private Banking. "Those concerns are warranted, because Canada is the US’ largest trading partner and it’s only natural that we will be affected by what happens south of the border."

The annual value of Canada’s bilateral goods and services trade with the US is approximately USD600bn. The US is the largest foreign investor in Canada and the most popular destination for Canadian investment abroad. In 2009, American direct investment in Canada was close to USD288.3bn, while Canadian direct-investment holdings in the US reached USD261.3bn.

The majority of Canadians (83 per cent) are proud of Canada’s overall economic performance relative to the economies of the US, Europe and other parts of the world

Three-quarters (74 per cent) are optimistic about Canadian financial markets

Half of Canadians anticipate that their current investments will grow in value over the next year
"Canada’s economy remains strong compared to those of our global peers," says Taylor. "But while American equity markets have performed fairly well recently, there have been some mixed economic signals coming out of the US over the last year. When combined with the ongoing sovereign debt crisis in the Eurozone and other trouble spots around the world, the time is right for Canadian investors to ensure they balance risk in their portfolios and avoid being overweighed in one specific geography."

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