BMO Capital Markets chief investment strategist Brian Belski is getting even more optimistic about Canadian stocks,
“According to our models, there has been both a fundamentally driven broadening out of performance and definitive shift toward more cyclical factors in the TSX so far this year. In fact, all eight of our factor profile categories and 40 of the 57 individual factors we follow are outperforming the S&P/TSX year-to-date. This is in stark contrast to 2023 when only 2 of the eight and 17 of the 57 individual factors outperformed the market. This is the sharpest breadth of factor outperformance since 2020. From our perspective, this fundamentally driven broadening out of performance will be a key tailwind for Canadian equities through the second half of the year. Additionally, the Canadian market has seen a clear cyclical shift from value to growth factors. In 2023, the more defensive valuation and capital usage factors were the only factors to outperform. This year, more cyclical factors such as growth (both trailing and forward growth) and high-risk factors have been the top-performing categories. Interestingly, this is the mirror image of US factor performance, where more cyclical factors outperformed in 2023, and now valuation and capital usage factors are top performing categories year-to-date. From our perspective, this is yet another sign that Canadian equities are poised for a strong catch-up trade in the coming quarters”
Mr. Belski recommends a growth-at-a-reasonable-price (GARP) strategy to benefit from the trend. Notable names on his Tactical GARP Opportunities Model Portfolio include (alphabetical order) Brookfield Corp., Canadian Apartment Properties REIT, Celestica Inc., Canadian Natural Resources Ltd., Cenovus Energy, Emera Inc., Equinox Gold Corp., Finning International, Manulife Financial, Magna International, Nutrien Ltd., Royal Bank, Telus Corp., and TC Energy Corp.