If Canada can reach a new North American Free Trade Agreement with the U.S. and Mexico, the Toronto Stock Exchange could surge as much as 10 per cent over the next six months, according to one Bay Street portfolio manager.
“I have been calling the TSX a coiled spring,” said Ryan Lewenza, senior vice-president and portfolio manager at Turner Investments of Raymond James Ltd., said in an interview with BNN Bloomberg Wednesday. “What I mean by that is, NAFTA, housing concerns, macro issues have been suppressing the TSX – and foreign investors have been avoiding the Canadian market.
“If we resolve NAFTA, the coiled spring could have a bounce … We would get an immediate surge, a two- to three-per-cent rally in the markets over a couple of days. Ten per cent might be over another six to seven months.”
Lewenza’s comments come as the U.S. and Mexico reportedly move closer toward a consensus on a new NAFTA, with progress made on some issues including rules for automobile manufacturing. U.S. President Donald Trump could announce a handshake deal with Mexico as soon as Thursday, according to a report by Politico citing unnamed sources.
Lewenza said the de-escalation of global trade tensions has been “underappreciated” by investors.
“Maybe I’m a bit naïve but I think prior to the midterm elections in November, we might have a NAFTA deal which would be huge for Canada, huge for the TSX,” he said.
He added that the TSX is already set up for a surge if a NAFTA resolution is reached.
“No. 1, [the TSX has] lagged, and no. 2, it’s the cheapest relative valuation we have seen relative to the U.S. markets nearly in history,” Lewenza said. “We still have robust corporate profits. Oil is at $65. These are generally good conditions for the TSX.”
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