National Bank of Canada Eco. & Strat. Team
National Bank of Canada
Highlights
Global equities continue to struggle. In Q3, the MSCI AC index is down for a second consecutive quarterly decline – a first in four years. A deteriorating earnings backdrop is exacerbating the downward pressure on the index.
We still think earnings growth is possible in 2016, provided of course that a few things go right. First, the global economy needs to get out of its funk. After a challenging first half of the year, world industrial output is picking up. Otherwise, USD appreciation needs to be kept in check to break the disinflationary trend that is currently dogging the earnings outlook. The threat of a Fed rate hike notwithstanding, there are policies that could offset USD strength. One would be to include the Chinese yuan in the IMF’s basket of reserve currencies.
Our asset mix is unchanged this month, with equities still overweighted relative to bonds and a regional bias towards the United States. The key to avoidance of a bear market is a combination of continued U.S. growth and a low-inflation environment that allows the path of monetary normalization to be gradual. That is the environment today and in our view it is likely to persist for some time. We would reconsider our asset mix if credit market spreads were to increase to the point of undermining the 2016 profit outlook.
Our sector allocation for the S&P TSX is unchanged this month. We remain comfortable with our current recommendation to overweight bank stocks as the economy is growing again and recent gains in fulltime employment continue to support the housing market.
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.
Recommended Content
Editors’ Picks
EUR/USD fluctuates near 1.0700 after US data
EUR/USD stays in a consolidation phase at around 1.0700 in the American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold keeps consolidating ahead of US first-tier figures
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.