BofA Securities quantitative strategist Ohsung Kwon believes the Canadian economy bottomed in November 2023 and is “now in a clear upturn,” with the TSX set to outperform the S&P 500.
Sharp improvement in the OECD leading indicators for Canada and commodity prices are the main reasons for the upturn in Mr. Kwon’s model. In addition, BofA Securities economists believe that the Bank of Canada key lending rate, which is currently half a percentage point lower than the equivalent Federal Reserve rate, will be 1.5 percentage points lower by the end of 2024. The more aggressive rate cutting by the Bank of Canada would be stimulative for domestic growth.
Mr. Kwon suggests that global investors buy economically sensitive Canadian stocks paying dividends. The TSX currently yields 2.4 times more than the S&P 500, a record spread that should attract foreign investment. ‘A clear path to cut rates in June’: How economists and market bets for BoC moves reacted to Tuesday’s inflation data
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