Fergal Smith

TORONTO (Reuters), Canada’s stock market will increase to its record-breaking high in the next year, as domestic economic recovery supports corporate earnings. However, gains are likely to slow down from the 2020 breakneck pace of Reuters.

The median prediction of 26 portfolio managers and strategists was for the S&P/TSX Composite index to rise 9.1% to 22,540 by the end of 2022.

The August forecast was 22,000. This is a record-breaking move and would easily surpass the 21796.16 month high. This was followed by a forecast of 23.150 for the middle part 2023.

It had risen 18.5% from the beginning of the year. This puts it on pace for the second largest gain since 2009.

Angelo Kourkafas is an investment strategist with Edward Jones. “We believe the economy and the markets will continue progressing further into the middle-cycle phase next year,” he said. We are now past the weakest point in the cycle but we still have plenty of runway, particularly from an economic perspective.

Canada’s economy https://www.reuters.com/world/americas/canadian-economy-posts-annualized-gain-54-q3-october-gdp-seen-up-08-2021-11-30 grew at an annualized rate of 5.4% in the third quarter, beating analyst expectations, and growth most likely accelerated in October on a manufacturing rebound.

Colin Cieszynski is chief market strategist for SIA Wealth Management. He stated that banks can still benefit from an improving economy, reducing loan loss provisions, and resource companies can profit from higher commodity prices.

The combined value of Toronto’s financial and resource sector accounts for 55%.

Nearly all respondents who responded to a question regarding the outlook on corporate earnings anticipated that earnings would improve. The pace of growth might slow.

“We expect a decelerating pace of (earnings) growth,” said Chhad Aul, chief investment officer & head of multi-asset solutions at SLGI Asset Management Inc. “In particular, we expect the recent strong earnings growth in the energy sector to begin to moderate.”

Since October, the price of oil has fallen 24%, making it a critical driver for earnings from the sector. The pressure was created by increasing coronavirus infections in Europe, and detections of Omicron, possibly a vaccine-resistant variant.

Investors also see a risk in the outlook: a decrease in support for policy.

With inflation climbing, the Bank of Canada https://www.reuters.com/world/americas/bank-canada-signals-it-could-hike-rates-sooner-than-expected-2021-10-27 has signaled it could begin hiking interest rates as soon as April and the Federal Reserve https://www.reuters.com/markets/us/powell-yellen-head-congress-inflation-variant-risks-rise-2021-11-30 is mulling whether to wrap up tapering of bond purchases a few months sooner.

Ben Jang (a portfolio manager at Nicola Wealth) stated that the key factor is how fast fiscal and monetary policy normalization proceeds. “This will probably lead to greater volatility in the markets and potentially return us to an environment where drawdowns are more than 10%.”

Nearly all of the respondents answered yes when asked if they expected a correction in the next six months.