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Global markets are opening new doors for investors
From Spain’s financial strength to Canada’s resource boom and Japan’s fiscal revival, diversification is revealing powerful growth stories worldwide
- PUBLISHED: Fri 20 Feb 2026, 6:00 AM
The shakeout in US technology stocks, as well as geopolitical concerns around the world, are sending an important message to stock investors — diversify your holdings across sectors and geographically.
Stocks are called “risk” assets for a reason. They don’t always go up, even though on average they can provide a steady stream of gains year after year. In a major selloff, nobody is spared but investing in different parts of the world can reduce some of the negative impact. Holding too many of the same types of stocks or in the same country or region can hurt even more in a downturn because they could all go down together. But diversifying — and blending value and high quality with high beta—can help smooth out returns. “You ideally want to be diversified across markets because they have different sector exposures,” said Aniket Ullal, head of ETF research at CFRA Research.
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Many of the world’s stock markets have gotten off to a good start in 2026, after a banner year last year. KT LUXE plans to periodically travel the world to feature new groups of stock markets. This week, we are visiting Spain, Canada and Japan — all developed markets on different continents and with interesting growth stories.
As Ullal points out, considering how much exposure your portfolio might have to different sectors is a smart strategy. For instance, when big technology stocks get hurt, holding strong dividend payers and looking to steadier-but-less-flashy companies, like consumer staples, healthcare or materials, can provide a good hedge.
Gina Martin Adams, chief market strategist with HB Wealth, said the correlation between markets is declining, meaning world markets are not moving as much in lock step as they had been. That makes for interesting opportunities for investors. “US, Canada correlation has declined. US, Japan correlation has declined. There’s a regional dispersion that has developed,” Adams said. “The dispersion, which is the difference of the best performing market versus the worst performing market, rose as well to levels we haven’t seen since 2006.”
Adams said part of the reason is that the US became much more concentrated in big tech, but the rest of the world did not. The S&P 500 index is heavily influenced by a few big technology stocks, like Apple, Amazon and Alphabet. She said while those names have sold off recently, tech stocks in emerging markets were still positive.
Spain’s Market Momentum
Sector diversification is a particularly important consideration when looking at the many markets of Europe. That brings us to our first stop — Spain. The Spanish stock market is driven by different industries than its northern neighbours. “An important thing to know is that the sector composition of the markets within southern European countries is quite different than a market like Germany,” said Ullal. “Spain is dominated by two sectors, banks and financials, and the second is utilities.” Germany’s market is more heavily tilted towards industrial companies.
The Spanish IBEX index was up more than 40 per cent in 2025. Over the past year, the iShares MSCI Spain Exchange Traded Fund in US dollar terms had a total return of more than 70 per cent, while the iShares MSCI Germany ETF returned around 35 per cent, Ullal said. The ETFs are based on the components of the MSCI indexes for each country.
The top 10 holdings of the MSCI Spain make up 76 per cent of the portfolio, Ullal said. Of those 10, CFRA has buy ratings on seven of those, including banks like Santander and CaixaBank, as well as utility Iberdrola.
Spain’s economy is also outperforming other major countries in Europe. Spain’s GDP is expected to expand by 2.3 per cent this year, a full percentage point higher than growth across the Euro zone. Goldman Sachs says Spain’s economy has benefited from a rebound in manufacturing and services, after suffering the largest negative growth hit among European Union countries during the pandemic. Its growth is now leading the larger economies of Europe. “The other part of the story for Europe is just investment spending, fiscal expenditure, defence spending, all of which is creating slightly brighter long term growth prospects for that region and to some degree capital flows,” said Adams.
Canada’s Expanding Reach
Moving on to North America, Canada’s stock market is home to many natural resource companies unlike its neighbour, the US, which is dominated by big tech companies. That provides an opportunity for diversification for investors in the region.
Ian McKinnon, chief investment officer at Montreal-based Addenda Capital, expects Canadian stocks to gain about 10 per cent this year, slightly behind his expectations for the US market gain. Canada’s S&P/TSX index rose 32 per cent in 2025.
McKinnon said his firm has its largest Canadian position in financials. “We have six big banks that dominate. We have three big life insurance companies. That makes up almost a third of our marketplace,” he said. Resource-related companies make up a similar portion. “As you look at materials and energy, rocks, trees, oil and natural gas — that’s about another third.”
The materials sector was up 100 per cent last year, he said. It was helped by gold mining stocks. A wild card for Canada is the status of its three-way trade agreement with the US and Mexico. The trade pact is currently under review and is expected to be revised.
Canada has been broadening its trade relationships, working on deals with China and India. The country is also looking to export more of its energy products beyond the US, and launched its first liquefied natural gas exports last year. There is also a new petroleum pipeline under discussion that would take crude to the west coast for export to Asia.
At the same time, the US is dependent on Canada for energy. “In any kind of trade situation, the US cannot detach from Canada entirely because of the dependence on the country for refined (energy) products. In the end, Canada gets the benefit of trade with the US while they’re expanding their opportunities with the rest of the world,” Adams added. Canadian crude is shipped to US refiners in the Midwest and Gulf Coast.
About 70 per cent of Canada’s total exports go to the US, but the level has been falling. “At the end of the day, our boat is very much tied to what’s going on in the US,” said McKinnon.
Japan’s Policy Pivot
Our final stop is Japan, a country that has reawakened investor interest in a big way. The country is pursuing expanded fiscal spending, a policy that is expected to be supported after a snap election this month gave Prime Minister Sanae Takaichi a strong majority in parliament. “I think Japan is super interesting because they’re coming out of a deflationary phase, spending a lot on fiscal investment and likely to see a long-term shift in earnings growth over the much longer forecast horizon,” said Adams.
The Japanese Nikkei Index has risen more than 45 per cent in the past year. Total return for the iShares MSCI Japan Index ETF was 25.9 per cent for 2025, Ullal added.
In the MSCI Japan index, industrials is the biggest sector at about 30 per cent, while financials are 21 per cent and information technology comprises 13.8 per cent, he added.
Japan’s focus on corporate governance and transparency has also made the market more attractive to outsiders. The fiscal spending has sent Japanese bond yields higher. “It’s a bit of a dance. If the cost of capital is going to go higher as bond yields go higher, but if you also get exponential improvement in earnings growth as a result of broader economic conditions improving, that could be a pretty good investment story for the equity market,” said Adams.
Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said he recommends a strategic weight on Japan. He also warns that investors scanning the world for opportunities in stock markets need to consider how currency dynamics affect them. “For Japan, it’s trickier because we still think the yen has a propensity to weaken from here.”
Christopher said investors should make sure they are aware of the major sectors they are buying in all three countries. “All of these countries look like they have upside. You want to be careful here because of the prominence of the financial sector and the presence of low rates that are subject to rise,” he said.
