Winter 2007

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Exploring the U.S. opportunity


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U.S. equity markets have recently faced a number of well publicized headwinds, but it’s important to keep these short-term economic trends in perspective. U.S. economic fundamentals remain strong, corporate earnings are healthy and stock valuations are attractive.

By Joan MacCarthy

U.S. equity markets have recently faced a number of well publicized headwinds, but it’s important to keep these short-term economic trends in perspective. U.S. economic fundamentals remain strong, corporate earnings are healthy and stock valuations are attractive.

Several key themes make U.S. investments an interesting opportunity—particularly for Canadian investors with goals of earning strong long-term returns, diversification and managing risk:

Broader diversification. Investing in the U.S. can give you more exposure to major world industries such as consumer goods, technology and health care, which can increase your portfolio’s overall return potential, while managing risk.

Strong returns. The U.S. market has outperformed the MSCI World Index over the past 20 years. An analysis of the index shows that a global portfolio with U.S. exposure has outpaced a global portfolio without U.S. exposure by approximately 1.1% annually.

Currency advantage. With the Canadian and U.S. dollars valued much closer to par, Canadians are now able to buy shares in the world’s largest equity market at historically low prices.

Economic stability. The U.S. remains an economic powerhouse. Inflation is below average, unemployment is low, consumer spending is relatively strong and U.S. corporate earnings continue to rise. Plus, many major U.S. companies derive earnings from overseas sources, and are able to benefit from a strong global economy.

Attractive valuations. U.S. corporate earnings have been growing at an above-average rate for the last five years, yet share prices have not kept up. As a result, some U.S. stocks currently offer attractive valuations compared to the current and expected future profits being earned by American companies.

For more information, visit MDfinancial.cma.ca or call 1 800 229-1798.

Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Obtain a copy of the prospectus before investing by calling your MD consultant or the MD Financial Trade Centre at 1 800 267-2332.

MD Financial includes CMA Holdings Incorporated companies offering financial planning and a banking referral service arrangement through MD Management Limited, mutual funds by MD Funds Management Inc. and MD Private Trust Company, investment counselling services by MD Private Investment Management Inc., estate and trust services through MD Private Trust Company, and insurance products by MD Life Insurance Company and MD Insurance Agency Limited.

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