Canadian market could outperform U.S. for rest of 2021: BMO strategist

The Canadian market has a “very good shot” at outperforming the U.S. market for the remainder of 2021, says an investment strategist with one of Canada’s Big Six banks.

A lot of price momentum has already occurred in the U.S., said Brian Belski, chief investment strategist with BMO Capital Markets, and there’s room for Canadian equities to catch up.

The S&P/TSX composite index is trading at a price-to-earning multiple of 19.16 compared to 26.11 for the S&P 500, according to Bloomberg data.

“Our resounding theme for Canada versus the U.S. for most of the last 10 years at BMO has been ‘As America goes, so goes Canada,'” Belski said Wednesday during a BMO Global Asset Management webinar.

Belski and his team’s solid track record as forecasters was noted at the webinar: in 2012 his price target for the U.S. stock market was within a point, and under nine points in 2014. The past year has seen a couple of upward revisions amid robust earnings. In August, Belski revised upward his outlook for the S&P/TSX composite index to 22,000 points by year-end. It closed Wednesday at 20,158. His year-end target for the index’s earnings per share is $1,400.

“Changing our forecast for a second time [was] a very big deal for us with respect to how we look at things,” he said. “Our process and discipline tells us to continue to be bullish and that the market is transitioning to more of an earnings-driven market, relative to a momentum market.”

The materials and industrials sectors have “the best opportunity right now” in terms of earnings and growth for the rest of 2021, Belski said. BMO Capital Markets is “positioned accordingly” in copper, gold, waste and defence companies.

He also said Canadians under-own telcos such as Bell, Rogers and Telus — names that provide “strong earnings growth but also provide you with very strong dividend growth.”

And BMO is bullish on financials and Canadian banks. In the U.S., BMO continues to like “money-centre banks” such as Bank of America and JP Morgan because they have scalable assets and financials, Belski said.