Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Canada's TSX to hit record high in 2021 on likely vaccine rollout: Reuters poll

Published 11/25/2020, 02:27 AM
Updated 11/25/2020, 02:30 AM
© Reuters. The facade of the original Toronto Stock Exchange building is seen in Toronto

© Reuters. The facade of the original Toronto Stock Exchange building is seen in Toronto

By Fergal Smith

TORONTO (Reuters) - Canada's main share index is set to extend its rally over the coming year as the likely rollout of a COVID-19 vaccine bolsters prospects for the economically sensitive financial and resource stocks that dominate the index, a Reuters poll found.

The median forecast in a survey of more than 20 portfolio managers and strategists was for the S&P/TSX Composite index to rise nearly 8% to 18,400 by the end of 2021. That was higher than the 18,000 forecast in August's poll, and would surpass February's record high of 17,970.51.

The index has rebounded from an eight-year low in March at 11,172.73.

"The run-up in stocks will likely not end in 2021 as (U.S.) stimulus likely comes early in the new year, vaccines start to get distributed in the second half of the year and most companies go back to normal in the latter part of 2021," said Sadiq Adatia, chief investment officer at Sun Life Global Investments.

Investors are hoping for progress in Washington in talks to craft a new fiscal relief package, while the recent surge in global coronavirus cases has been offset by encouraging news from a number of major drugmakers on the effectiveness of their candidate vaccines.

When asked if their forecasts were based on recent vaccine progress, three quarters of the poll's respondents said they were.

A vaccine rollout would "benefit Canada more than most countries because of the large proportion of value and cyclical stocks on the TSX," said Matt Skipp, president of SW8 Asset Management.

Cyclical stocks tend to be sensitive to the economic cycle. They include financial and resource stocks, which account for more than 50% of the TSX's valuation.

Pent-up demand should result in a surge in economic activity in the second half of 2021, according to Mike Archibald, a portfolio manager at AGF Investments.

"Energy demand should return to more normal levels, helping the Canadian energy sector, and improving activity should result in better conditions for the Canadian banks," he said.

The TSX is expected to end 2020 at 17,100, barely changed from its current level.

The index is less expensive than some others, with a higher weighting in technology or other sectors more favored by investors during the pandemic. Its price-to-earnings ratio is about 13, using forward-looking earnings estimates, compared to 22.4 for the S&P 500, I/B/E/S data from Refinitiv showed.

A slight majority of contributors forecast earnings would return roughly to pre-COVID-19 levels within a year or earlier.

"Rebounding corporate earnings, along with ongoing monetary policy stimulus and fiscal stimulus, will continue to provide broad support," said Angelo Kourkafas, investment strategy analyst at Edward Jones.

© Reuters. The facade of the original Toronto Stock Exchange building is seen in Toronto

(Other stories from the Reuters Q4 global stock markets poll package:)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.