The warning signs are flashing red. Private Equity Manager Stephen Johnson recently highlighted what many of us have been quietly observing — Canada’s economy is bleeding capital at a worrying pace.
According to the Financial Post, foreign investors pulled $3 billion from Canadian shares in June, on top of $11.5 billion in May. At the same time, Canadians themselves shifted $9 billion into foreign securities — largely U.S. stocks and non-U.S. bonds. The result? An $8.3 billion outflow in June alone, bringing the second-quarter total to $43.7 billion. That follows a similar exodus in the first quarter.
Add to this the backdrop of U.S. Fed Chair Jerome Powell warning that inflationary pressures remain stubborn even as growth slows — and you see the troubling cocktail forming: sluggish growth, rising prices, and declining investment. That is the very definition of stagflation.
Johnson’s concern is not abstract. Canada, weighed down by high debt levels, dependence on foreign capital, and weak structural growth, is particularly vulnerable at this moment.
The takeaway? Unless there is decisive policy direction and renewed investor confidence, Canada risks sleepwalking into a stagflationary trap — a position no advanced economy wants to be in.
