Continued job losses and an unstable real estate market have resulted in market volatility and an increase of business and personal bankruptcies. Between April and June, 2010, the Administrative Office of the U.S. Courts counted 422,061 bankruptcies, an 11% increase on a year by year basis. These disturbing figures signal the highest rate of bankruptcy since 2005. Furthermore, 2010 has seen the failure of 113 American Banks, well on track to overtake the 140 banks that went under in 2009.

IN PICTURES: 9 Tricks Of The Successful Forex Trader

In contrast to America, personal and business bankruptcies have not been as prevalent in Canada; not a single Canadian bank was forced to shut its doors through the credit crisis. Furthermore, Canada's fairly high unemployment rate of 8.0% is considerably less than the 9.5% experienced in the States, especially after considering that many potential American workers have removed themselves from the labor force as the opportunity to find employment remains grim.

Overall Market
Following the collapse of Lehman Brothers on September 15, 2008, perhaps the official beginning of the great recession, the Canadian market has outperformed its southern neighbor. The iShares MSCI Canada Index ETF (NYSE:EWC) has since fallen 6.1% while SPDR (NYSE:SPY) has tumbled by 14.8%. Based on a five-year time horizon, the Canadian ETF has appreciated by over 30% while the SPY, which tracks the performance of the S&P 500. receded by 11%. Even year-to-date performance indicated that Canada has outperformed the American market by approximately 3.7%.

Financials
The contrast between American and Canadian market performance can best be drawn from looking at the financial sector. Royal Bank of Canada (NYSE:RY), Canada's largest financial institution, with a market cap of $73 billion, has not has a solid 2010, underperforming analyst's expectations by 14% in its latest quarter and losing 8.6% of its share value. Nonetheless, it has still managed to outperform Bank of America (NYSE:BAC), the largest bank within the United States by 2%. On a five-year time horizon, Royal Bank has given shareholders a 35% return, much better than the 63% loss of BAC shares. Following the collapse of Lehman, RY has moved up 4.7% and BAC has by fallen 60%.

Consumer Discretionary
A somewhat similar pattern of returns emerges when analyzing the largest coffee chains within both countries. Tim Hortons (NYSE:THI) has produced returns of 13%, 14% and 16% based on a time horizons of five years, Lehman's bankruptcy and year-to-date respectively. Starbucks (Nasdaq:SBUX), on the other hand, has lost 5% within the last five years, and is up only 7% YTD. Following September 15, however, it shares have risen considerably. An important consideration to the limitations of this comparison is that Starbucks has a broader international asset base than Tim Hortons. Tim Hortons has over 80% of their locations within Canada and only a small amount in the States; Starbucks has locations all over the world.

The Bottom Line
Depending on the time interval of interest, many American stocks have outperformed their Canadian counterparts by a wide margin. With many companies on the verge of collapse during the great recession, those who survived, like Citigroup (NYSE:C), were able transform their business, rewarding shareholders who bought stocks at their lows. However, long-term trends suggest that Canada is a much safer investment. (For more stock analysis, check out Dependable Dividends.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  2. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  3. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  4. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  5. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  6. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  7. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  8. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  9. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  10. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center