BMOBMO chief strategist Brian Belski outlines his forecast for Canadian equities in 2022, and notes favoured sectors. “Although this sharp recovery is unlikely to be matched in 2022, we believe Canadian equities can still approach double-digit growth in 2022. In fact, we forecast that the S&P/TSX will rise 16% (from current levels) and reach 24,000 by 2022 year-end, which marks another new all-time high. Our expectation is based on the assumptions of a more normalized cost-of-equity (DDM model) and a market multiple (PE model) that is in line with historical average. Overall, our 2022 outlook assumes a return to normalcy and a transition to a more earnings-driven environment, which is likely to see greater bouts of volatility”
Mr. Belski recommends overweight positions in Consumer discretionary stocks (Aritzia Inc., Canadian Tire Corp., Dollarama Inc., BRP Inc., Restaurant Brands International Inc., Sleep Country Canada Holdings Inc. ), Financials with more U.S. exposure (Toronto-Dominion Bank, Royal Bank of Canada, Canadian Imperial Bank of Commerce, Manulife Financial Corp. and Sun Life Financial Inc.) Industrials (Canadian National Railway Co., Thomson Reuters Corp., Waste Connections Inc.), and Materials (West Fraser Timber Co. Ltd., Nutrien Ltd).