Opinion is split in the investment industry right now. Some experts believe market signals point to a correction and are adopting a cautious approach
, while others feel more positive and see the current environment as presenting some good opportunities to put some cash to work.
Derek Massey, Head of Portfolio Management, HSBC Global Asset Management Canada, is most certainly in the positive camp. In fact, Massey describes the current market landscape as being a “Goldilocks environment”.
“As much as that may sound a little flippant, it’s true,” Massey says. “Markets continue to do very well on the back of some very good economic growth, and companies are starting to report some really good earnings, which is making valuations not too robust at this point in time. The goldilocks environment that we’ve been describing can continue for quite some time.”
Massey believes the markets are in a “sweet spot”, and are not too cool and not too hot. Market volatility has been low, inflation is subdued and the synchronized nature of global growth continues to ramp up. All of these positives continue to play a leading role in the markets, despite all of the rhetoric and headwinds from south of the border.
“Whether it’s a tweet about North Korea or the threat of scrapping NAFTA, the market continues to march and reach new highs,” Massey says. “I think we’ve gone beyond the muddling 2% GDP growth. We’re forecasting somewhere in the neighbourhood of 3.5% global growth, which will be led by the US. Europe has also really picked up.”
Massey’s confidence also includes Canada and he expects the Canadian stock market to continue rising on the back of improving energy prices.
“Our oil names have bounced back and our financial stocks have also performed well, especially since the two interest rate hikes earlier this year,” Massey says. “Following on from the flat environment of the first two quarters of the year, we’ve seen marked improvement in the TSX Composite. It’s a little north of 5% year to date, and all signs point to this growth continuing.”
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