Editor’s Note: Please see our analysis of the latest news from our other Dividend Champions in the Portfolio Update section following the article below.

There was a pundit who once said that he pays attention to even the most dire predictions because eventually they become true. That’s certainly a provocative statement, especially since there’s no shortage of dire predictions given what’s happened to the global markets since the start of the year.

The latest prediction that caught our attention is Macquarie Group’s forecast for the Canadian dollar to fall to US$0.59 by the end of the year, and then remain at depressed levels through 2018.

The loonie currently trades just below US$0.70, its lowest level since 2003. That’s a far cry from when the currency pushed above parity with the U.S. dollar at the height of the global commodities boom.

Notably, if the Canadian dollar were to sink to US$0.59, that would be a few cents below the 2002 bottom, which was the currency’s lowest level over the roughly 45-year period for which we have data.

Macquarie’s bold forecast is also an outlier among its peers. Indeed, the analyst with the next-worst forecast for the loonie sees it bottoming just below US$0.67.

Back in late November, when the Canadian dollar was trading at US$0.75, we wrote, “Since markets have a penchant for drama, we wouldn’t be surprised to see the exchange rate drop to US$0.70 following a [U.S. Federal Reserve} rate hike.”

But it seems that some analysts have an even greater penchant for drama than the market.

The main reason someone might give credence to Macquarie’s forecast, aside from the prevailing atmosphere of doom and gloom, is that this particular analyst earned a top ranking from Bloomberg for his forecasts about the currency last year. In other words, he seems to have won the race to the bottom.

There’s no question that the Canadian dollar will remain under pressure over the next year. And it might not even take a fat-fingered forex trader hitting the wrong button to prove this particular analyst right.

After all, US$0.59 is only about 15% below the current level, and we’ve already seen the currency slide from US$1.06 just a few years ago.

But markets are forward-looking by nature, and a lot of the doom and gloom out there is already priced into the currency. And it does seem to strain credulity that the current economic climate is worse for the currency than at any time since 1971.

We’d probably have to see global deflation rear its head in a meaningful way for that truly to be the case. And Macquarie’s not making that case.

So what’s Macquarie’s rationale for its forecast? The analyst believes that Canada’s economic straits are worse than in the 1990s, especially given the country’s greater dependence on oil. Back then, Canada’s export economy tilted more toward manufacturing than energy.

He says the fact that the manufacturing sector has yet to fully recover after being gutted during the last downturn means that it won’t be able to fill the gap left by crude’s crash.

In the near term, of course, the Bank of Canada’s monetary policy will likely weigh the most on the currency. While futures markets give nearly even odds to another quarter-point rate cut following the central bank’s meeting next week, those odds rise to 64% by March.

At the same time, pressure is mounting on Ottawa’s recently elected Liberal government to front-load more of its promised stimulus spending. That’s because we’re already near the limit of what monetary policy can achieve, even if negative interest rates are now part of the Bank of Canada’s toolkit.

The government vowed to put C$60 billion toward infrastructure spending, but only C$17.4 billion of that has been allocated for the government’s first term. That’s classic politics, but if the lower loonie continues to pinch voters’ pocketbooks, then the government could be compelled to do more sooner rather than later.

And a more robust fiscal policy would help support the economy, while also putting the currency on a steadier footing.

The Dividend Champions: Portfolio Update

By Deon Vernooy

WestJet Airlines (TSX: WJA, OTC: WJAVF) reported last week that their load factor for December was slightly lower than the previous year. At the same time, total passenger numbers were up by 3.9% in the month and reached an all-time record of 20.3 million for the year.

The key factor that concerns investors at the moment is that capacity is expanding faster than passenger growth, which resulted in the lower load factor. For the full year, the load factor was 80%, with a 3.3% increase in traffic and a 5.2% increase in capacity.

Canadian airlines are major beneficiaries of the strong increase in international tourists (see below) caused mainly by the weak loonie. And that may be just enough to help WestJet and Air Canada fill the additional capacity.

In any event, WestJet has an outstanding track record of managing their business profitably, and we believe that the market may be overly concerned about overcapacity.

Meanwhile, the stock is trading well below our fair value estimate of C$21/US$15, with a forward P/E ratio of 6.5 times and a dividend yield of 2.9%.

Canadian tourism is one of the major beneficiaries of a weaker Canadian dollar. International tourism statistics indicate that 7% more tourists visited Canada over the 12-month period that ended in October compared to the prior-year period.

Overnight trips by U.S. residents rose 9.3% in the first 10 months of 2015, while there was a 21.2% decline in the number of Canadians returning from same-day trips across the border.

Total expenditures by tourists also increased by 3% in the third quarter compared to a year ago.

Both domestic and international tourism increased in the quarter, with a 6% jump in spending by foreign tourists. The Pan-American Games and the FIFA Women’s Soccer World Cup, both held in the third quarter also contributed to the improving tourism picture.

The fact of the matter is that more Canadians are spending their holidays at home, and international visitors in Canada are taking advantage of the cheap Canadian dollar.

Members of the Dividend Champions portfolio, Whistler Blackcomb (TSX: WB, OTC: WSBHF), InnVest REIT (TSX: INN-U, OTC: IVR.F) and WestJet Airlines Ltd (TSX:WJA, OTC:WJAVF) are all benefitting from this trend.