The Canadian stock market “is a huge contrarian buy right now,” according to Brian Belski, chief investment strategist at BMO Capital Markets.
Belski’s year-end target for the S&P/TSX Composite Index is 17,600, 16 per cent above current levels, although he admitted in a recent note that 16,500 to 17,000 is looking more realistic. The index has fallen almost 7 per cent this year, to 15,107.
He’s not paring his bullish view on Canada, admonishing a group of portfolio managers in Toronto for being scared of low oil prices, household debt and the perception that fiscal policy is uncompetitive.
“I think Canada is positioned for a huge recovery and a huge surprise with respect to performance,” Belski told the Portfolio Management Association of Canada’s national conference Thursday, adding that investors will shift their money back to the country amid volatility in Europe and emerging markets.
Despite historically low Canadian crude prices, which are trading at a US$42 discount to already-weak West Texas Intermediate, Belski sees a “massive bounce” in energy stocks next year. He prefers high-quality names like Canadian Natural Resources Ltd. (CNQ.TO), Suncor Energy Inc. (SU.TO), TransCanada Corp. (TRP.TO) and Enbridge Inc (ENB.TO).
He also said now is a “generational opportunity” to buy financials and prefers Canadian lenders with cross-border businesses, like Toronto-Dominion Bank (TD.TO). He also likes the Canadian railways, Waste Connections Inc. and Magna International Inc (MG.TO).
In the U.S., Belski sees double-digit earnings growth in 2019 and doesn’t expect a recession until at least 2021. He also doesn’t think President Donald Trump will run again in 2020.