Canada’s TSX set to surpass 20,000 amid rising commodity prices: Reuters poll
TORONTO (Reuters) – Canada’s main stock index is expected to break 20,000 for the first time by the end of this year, as global economic recovery from coronavirus crisis boosts outlook for stocks resources, according to a Reuters poll.
According to the median forecast of 26 portfolio managers and strategists, the S & P / TSX Composite Index would reach 20,050 by the end of 2021, up 2.7% from the May 21 close and on- above February forecast of 19,650. It was then due to increase to 21,750 by the end of 2022.
“The cyclical recovery in the global economy will support commodity prices and translate into a strong earnings outlook for the TSX,” said Angelo Kourkafas, Investment Strategy Analyst at Edward Jones.
In April, the IMF projected the global economy to grow 6% this year, aided by the rollout of COVID-19 vaccines.
“The reopening is yet to come, further job gains are expected as the labor market downturn is phased out and the outlook for personal consumption is strong,” Kourkafas said.
The TSX has climbed 12% since the start of 2021, edging out Wall Street. On Friday it hit an intraday high of 19,614.78.
Materials and Energy stocks represent 25% of the Toronto market capitalization, compared to 5% for the S&P 500.
The higher weighting in resource stocks could help TSX outperform US markets over the next year, said Steve Palmer, chief investment officer at AlphaNorth Asset Management.
“A lot of commodities are in a strong uptrend,” Palmer said.
Copper prices have climbed this month to record highs, while the price of oil has nearly doubled since November to reach $ 64 a barrel.
Most investors who answered some additional questions expected corporate profits to rise for the remainder of the year. Still, a slight majority said a market correction of more than 10% over the next three months was likely or very likely.
“The price of the global economic recovery has been put forward,” said Dominique Lapointe, senior economist at Laurentian Bank Securities.
China’s withdrawal of fiscal stimulus and reduction in global quantitative easing have the potential to temporarily derail the rally in stocks this year, Lapointe said.
Last month, the Bank of Canada became the first major central bank to cut back on money printing stimulus programs during a pandemic. Some investors expect the Federal Reserve to signal a decline in the coming months if inflation heats up.
But the makeup of the Toronto market may offer some protection to investors.
“Inflationary fears that add volatility in global markets would not hurt the TSX as much as other less cyclical global equity markets,” said Matt Skipp, president of SW8 Asset Management.
(Other articles from Reuters Q2 Global Stock Market Survey 🙂
Reporting by Fergal Smith; additional survey by Swathi Nair, Manzer Hussain and Richa Rebello; Edited by Steve Orlofsky