Hello, this is Brian Belski – Chief Investment Strategist at BMO Capital Markets
We recently published our 2025 Year Ahead Market Outlook, representing our 13th consecutive forecast on the Canadian stock market on behalf of BMO.
As we expected, 2024 was a snap-back year for Canada in terms of equity performance – in fact, Canadian equities even outperformed its vaunted neighbor to the south during several elongated stretches of time during 2024 - despite a whirlwind of macro negativity that dominated headlines for most of the year. From inflation to interest rate cuts to recession fears to US election uncertainty – many Canadian investors doubted the resiliency of the Canadian stock market. For our part, our process and discipline are defined by an intense focus on bottoms-up analysis and routinely avoiding headlines and consensus rhetoric, thereby diminishing the possibility of being reactive. After all, the stock market is a market of stocks, and given the traditional value and cyclicality of the Canadian stock market, let alone its current valuation discount at the overall index level compared to the US, we believe Canada’s opportunity to outperform its neighbor to the south in 2025 is quite high. As such, our 2025 forecast for the S&P/TSX Index year-end price target of 28,500 on earnings of $1,600 represents continued gains for Canadian equities - well within the historical average for stock market returns.
In terms of sectors in 2025, we favor Consumer Discretionary, Financials, REITs and Technology – Tech and Consumer Discretionary for growth and consistency; and Financials + REITS for income and yield. In terms of the other sectors, we are neutral Communication Services, Energy, and Industrials, while advising clients to underweight Consumer Staples, Health Care, and Utilities. In terms of size – we want investors to think of it as – everything in moderation – owning equal parts large and small cap stocks – thereby lacking a significant emphasis on any equity class in 2025.
Thanks so much for joining us – here’s to another positive surprise for the Canadian stock market performance in 2025.
