Fergal Smith

TORONTO, (Reuters) – Canada’s major stock index will likely decline in the coming year because of slowing economic growth. Central banks also raise interest rates. A Reuters poll revealed this.

The median prediction of 26 portfolio managers and strategists was for the S&P/TSX Composite index to rise 4.4% to 21,183 by the end of 2022, compared with a forecast of 22,175 in the previous poll in February.

The record close high was 22,087.22 which it achieved on March 29, but the expected increase to 22,000 in 2023 was not reached.

Angelo Kourkafas is an investment strategist with Edward Jones, St. Louis. “There has been a significant adjustment in markets as we have moved from rapid growth last year and excess liquidity to slowing growth this year.”

This is not the best combination of equities.

The Bank of Canada is expected to increase interest rates by half of a percentage point next week, according to the money markets. That would be the second straight half-point move by the central bank, which usually raises rates in quarter-percentage-point increments.

However, the TSX’s 4.4% decrease since the start of the year was much lower than other benchmarks such as the.

It has been beneficial to have heavy weighting in the sectors that are more profitable due to higher commodity prices. The combined value of Toronto’s energy and material markets is 28%.

However, investors are beginning to see signs that inflation is peaking and some expect the outperformance of commodity-linked stocks will be ending soon.

Chhad Aul (chief investment officer, head of multiasset solutions, SLGI Asset Management Inc.) stated that as we enter next year, global growth will become a greater concern.

A majority of investors who responded to a series of questions anticipated that the Toronto market would see less volatility over the following three months. However, there are still headwinds that could linger.

Lorenzo Tessier Moreau (Senior economist, Desjardins) stated that “We expect interest rates to have a significant impact on the Canadian housing markets in the second half 2022 and 2023.”

Higher interest rates can be a boon for earnings in the banking industry, however higher risk associated with the housing sector could offset these gains.

According to April’s data, Canada’s average home prices fell by 6.3% in April. Sales dropped 12.6%.

Ben Jang (a portfolio manager at Nicola Wealth) stated that “central banks are in a difficult situation and there is a possibility for a recession 2023.”

(Other stories taken from the Reuters global Stock Markets poll package: