Canadian energy stocks remained bitten by tariff concerns today, with the benchmark Canadian energy ETF (symbol XEG.to) underperforming the US energy ETF (symbol XLE) for the fourth day in a row. Over the four days of trading this week, Canadian energy stocks have underperformed their US peers by 8.3%, a four day stretch of underperformance not seen since the COVID lows in 2020.
Figure 1 – XEG.to to XLE ratio
Chart courtesy of StockCharts.com
With inauguration day on Monday in the US, there are clearly concerns over potential tariffs in the near term. Of course, this could set up a slingshot higher if tariffs are not as bad as feared, if they exclude energy, or if they are non-existent. Since the COVID lows, Canadian energy stocks have broadly outperformed their US peers.
While Polymarket odds of Canadian tariffs being imposed next week (of any kind, not energy specific) are up slightly this week, they still remain rather low considering the move seen in the energy equity markets.
Despite the near term tariff concerns, there remains many reasons to be optimistic about Canadian energy in 2025.