Financial analysts predicting Canadian gloom have been getting plenty of ammunition lately. With US President Donald Trump taking shots at the trade sector and the hot housing market continuing to dominate headlines, investors have plenty to be concerned about. But according to one expert, those are just distractions from the early stages of a long-term bull market.
“US stocks are mired in a 20-to-25-year bull market. Canada is going to come along for the ride,” BMO Nesbitt Burns
Chief Investment Strategist Brian Belski told the Globe and Mail
Back in 2015, Belski predicted that the S&P/TSX Composite Index would hit 15,300 in 2016, and that it would outperform the S&P 500. Last year, the composite closed at 15,288 and managed to outdo the S&P 500.
“The US is going to continue to outperform Canada, I think, for the next three to five years,” he said, citing the States’ movement toward fiscal policy adjustments like tax cuts, healthcare changes, repatriation, and infrastructure. He added that the Trump administration’s support for the Keystone XL Pipeline would help the Canadian cause
Belski dismissed Trump’s recent tirades on dairy, energy, and lumber, saying that the US need for Canada’s oil, paper, wood, and other products will force Trump to maintain friendly terms within the North American region.
“This has been the most hated, discontented, discorded stock market rally in the history of bull markets,” he continued, “and it has everything to do with the fear and loathing of corporate America and financial services.”
Asked what will drive the next big market correction, Belski said that it “isn’t going to be Trump-related. Corrections are driven by fundamentals or some geopolitical-type of surprise, which you can’t manage money for.”
On the US side of the markets, he said his firm’s favourite sectors are health care, materials, and industrials. In Canada, they’re leaning toward financials — particularly insurance companies and banks with US exposure — as well as materials and industrials.
As for the housing markets, Belski said called the prevailing attitude among analysts a “chicken little” sentiment, referring to an expectation that the “sky is falling any day now.”
“Everyone can’t wait for housing to go down in Canada. They’ve been willing it lower for five years,” he told the publication. “Think about the bull market in America in terms of stock prices; since March, 2009, nobody has believed it. Fear and loathing gets you nowhere.”
When asked which sectors his firm’s underweight on, he identified REITs and utilities, Canadian health care (“there are better alternatives in the US”), and US telecoms (since Canadian telecoms have “better dividends and better earnings growth”).
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