Brian Belski's 2022 Canadian Market Outlook
BMO Capital Markets’ Chief Investment Strategist Brian Belski has released his 2022 Canadian market outlook. He explains that despite concerns over inflation and rising interest rates, the corporate earnings and economic environment are providing a solid backdrop for equities.
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Hello,
This is Brian Belski, Chief Investment Strategist at BMO Capital Markets.
We believe Canadian stocks will post their fourth consecutive year of positive returns in 2022 – albeit less positive – but that is very OK and very normal.
Our models show that the TSX Index in Canada will attain a price objective of $24,000 on earnings of $1,500.
While these returns certainly are more reserved relative to the average return in the past four years – positive is still positive.
To clarify even further, we believe this “less positive” trend does not apply only to price performance – but also to slowing earnings growth and diminished valuations – not to mention, a slowing trajectory of rising interest rates – and, yes – the strong possibility of decelerating inflation – especially during the second half of 2022.
Simply stated, steady earnings growth, still excessively low interest rates, declining valuations, and eventually subdued inflation are a very good backdrop for CDN equities.
Remember, equities are traditionally the best inflation hedge – and, yes, stocks can, will, and should go up alongside interest rates – after all, rising bond yields mean the economy is improving – which the stock market has already been telling us thanks to its powerful rally in the past few years in particular.
In terms of positioning, over the next 12-18 months, we are advising clients in Canada to Overweight the following in their equity portfolios: Financials, Discretionary, Industrials, and Materials – while neutralizing energy positions after an outstanding 2021.
However, clients are encouraged to differentiate these sector positions by increasing their focus on quality, growth-at-a-reasonable-price, and dividend growth across all size, styles, and sectors.
To be clear, society had been nothing less than tumultuous the past few years.
However, the stock markets and investing in general has been exciting to say the least for equities but as markets, let alone society itself begins to normalize and moderate over the next few years as the great unwind of the COVID19 pandemic ensues, we continue to focus on the positive – because after all, positive is still positive.
Brian Belski
Chief Investment Strategist
Brian is the Chief Investment Strategist and leader of the Investment Strategy Group, provides strategic investment and portfolio management advice to both ins…(..)
View Full Profile >BMO Capital Markets’ Chief Investment Strategist Brian Belski has released his 2022 Canadian market outlook. He explains that despite concerns over inflation and rising interest rates, the corporate earnings and economic environment are providing a solid backdrop for equities.
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