Canada’s economy has been in decent shape. The country’s economy rebounded more than expected in April, following a slight contraction in the previous month, shrugging off concerns that a tariff-led slowdown was getting more entrenched, per Reuters. <\/p>\n
The Gross Domestic Product (GDP) \u200cin April grew 0.5% on a month-on-month basis. Analysts polled by Reuters had estimated the GDP in April to grow 0.4% on a monthly basis, after the GDP contracted 0.1% in March. The GDP stalled in the first quarter of 2026, holding the 0.2% contraction from the last quarter of 2025, and contrasting with market expectations that it would expand 0.3%, per Trading Economics. <\/p>\n
Overall, the economy in mid-2026 is growing, but at a modest pace. It is neither booming nor in a deep recession. The economy is facing headwinds from trade tensions, high living costs and global geopolitical uncertainty, but recent data suggest that activity has started to recover after a weak start to the year. <\/p>\n
The United States is Canada’s largest trading partner. Close economic integration between the two countries is supported by agreements such as the United States-Mexico-Canada Agreement, which facilitates the movement of goods, services and investment across North America. <\/p>\n
Inflation (Headline) rose to 3.2% in May, which is the highest in recent times, mainly led by higher gasoline prices, geopolitical tensions in the Middle East and higher transportation costs. The measure of core inflation stayed unchanged sequentially in May, per Reuters. <\/p>\n
Interest Rate is kept at 2.25% by the Bank of Canada as an attempt to strike a balance between controlling inflation and supporting a slowing economy. <\/p>\n
The Manufacturing Sector deserves mention as the Purchasing Managers’ Index stood at 53 in June, which suggests that factories are still growing, per Reuters. <\/p>\n
What Lies Ahead? <\/p>\n
A weakly growing economy and steady core inflation mean that Canada’s central bank is unlikely to hike interest rates ahead. If the U.S.-Iran peace agreement holds good, we may see a decline in energy prices, which, in turn, may lower Canadian inflation. Commodity strength, resilient bank earnings and improving manufacturing activity are other tailwinds. <\/p>\n
While these factors are positives for the Canadian investing thesis, the country is a net energy exporter. iShares MSCI Canada ETF EWC invests about 16% of its weight in the energy sector. Hence, a decline in energy prices may have a little negative impact on the economy, as well as the fund EWC. <\/p>\n
While housing-related risks and trade uncertainty warrant monitoring, the combination of reasonable valuations, decent dividends and earnings growth leaves the medium-term outlook positive, particularly if commodity prices remain firm and the Canadian economy continues its gradual recovery. <\/p>\n
ETFs in Focus <\/p>\n
The EWC fund has gained 26.9% over the past year (as of July 8, 2026). So far this year, the fund has grown 7.7%. Over the past month, the fund has been flat, while over the past week, the fund has added 1.5%. <\/p>\n
Other ETF options include\u00a0JPMorgan BetaBuilders Canada ETF BBCA and Franklin FTSE Canada ETF FLCA. While BBCA and FLCA returned in line with EWC, FLCA seems to be a lucrative choice as it charges the least among the three funds. Its ultra-low 0.09% expense ratio makes it advantageous for long-term investors. FLCA also yields 1.77% annually, which is the highest among the three. <\/p>\n
Bottom Line <\/p>\n
Canadian ETFs are likely to remain attractive for investors who value income, diversification and exposure to natural resources. Compared with U.S. ETFs, they generally offer higher dividend yields, greater exposure to energy, mining and financials, and less concentration in the mega-cap technology stocks. If the global economy continues to expand and commodity demand stays firm, Canadian resource-oriented ETFs could continue to perform well. <\/p>\n
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report<\/a> <\/p>\n iShares MSCI Canada ETF (EWC): ETF Research Reports<\/a> <\/p>\n Franklin FTSE Canada ETF (FLCA): ETF Research Reports<\/a> <\/p>\n JPMorgan BetaBuilders Canada ETF (BBCA): ETF Research Reports<\/a> <\/p>\n This article originally published on Zacks Investment Research (zacks.com).<\/a> <\/p>\n