CIBC World Markets raises TSX target to 15,000

The forecasting team at CIBC World Markets has once again raised its predicted high-water mark on the S&P/TSX Composite Index and boosted its recommended equity weighting.

Led by chief strategist Jeff Rubin, CIBC is now predicting the index will hit 15,000 by the end of 2007, fuelled by continued strength in the energy sub-index. Total returns on the composite are expected to hit 23% for 2006 and 13% in 2007. The TSX index ended April at 12,204.17.

“As an interim step towards the 2007 target, CIBC World Markets is raising its 2006 target for the S&P/TSX composite index by 400 points to 13,600,” Rubin said in the research note. “Exploding energy prices should drive much of the gain in the stock market both this year and next.”

With that bullish call on equities, Rubin is raising his recommended stock weighting by two percentage points to 60%, with exposure to income trusts remaining steady at 10%. Those allocations represent an over-weighting of 10% and 5%, respectively, compared to the CIBC World Markets institutional all-asset benchmark.

Rubin’s team cuts its recommended fixed income exposure to 30%, underweighting bonds by 8%. The recommended asset mix leaves no room for cash holdings.

Within the equity portfolio, the group recommends a 0.5% shift from utilities to materials, reflecting recent gains in the price of gold. Rubin predicts bullion prices will continue to rise to between $675 and $700 per ounce by the end of 2006. The price of gold finished April at $656.90 an ounce.

Allocation to all other groups remain unchanged from last month, with a notable underweighting of 4% in consumer discretionary, 3% in technology, 2.5% in consumer staples and 2% in telecoms. With energy seen to be driving the market, the sector is over-weighted by 8.5%, making up 34.6% of the equity portfolio.

The report predicts crude oil prices will average $77 a barrel for 2006, rising to $90 a barrel in 2007. The NYMEX spot price for May 1 was quoted at $72.18 a barrel.

So far this year, the equity portion of the CIBC World Markets Strategy portfolio has outperformed its benchmark with a return of 11.19%, compared to 10.29% on the TSX. In 2005, the portfolio beat the index with a return of 26.90%, compared to 24.13%.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com