BMO's strategist sees Canadian investors as pessimistic, yet spots optimism in market cycles
Brian Belski, chief investment strategist at BMO Capital Markets, likens Canadian investor sentiment to “Eeyore from Winnie the Pooh” during an interview with BNN Bloomberg.
This emphasizes a tendency among Canadian investors to focus on the negative despite current market conditions. Belski highlights the cyclical nature of Canada's markets, particularly in sectors such as financials, energy, and materials, and their fluctuating performance against the S&P 500.
Despite the general uncertainty about future interest rate cuts, Belski noted that “Last year, all three underperformed the S&P 500. The year before, people forget, 2022, the TSX actually outperformed the S&P 500.”
He suggests that this cyclical behavior presents opportunities for investors and believes that the prevailing sentiment towards rate cuts should not dampen investing optimism.
“We are confounded, quite frankly, why so many people believed the feds are going to cut in March,” he said. “When we wrote our piece for the year ahead, meaning the 2024 forecast, we published it in November of 2023, and we said: 'Listen there’s a really good chance the feds are not going to cut rates.'”
He further elaborates on the historical precedence of the Bank of Canada acting before the US Federal Reserve, stating, “If you look at history, the Bank of Canada’s actions always happen first. They cut first, they pause first, they raise first.”
Belski shares insights from BMO's economics department, predicting a rate cut in Canada by June and in the US by July, albeit with diminishing chances due to strong employment figures.
Belski concludes by downplaying the importance of interest rates when “the economy is doing quite well” and reaffirms his belief in the shared economic trajectory of North America, stating, “Our theme remains resolute that as America goes, so goes Canada,” and anticipates that North America will continue to drive equity performance.
