With the global economy showing signs of positive growth, Canadian investors would do well this year to look across the ocean for market opportunities, according to Myles Zyblock, chief investment strategist with Toronto-based 1832 Asset Management LP, who spoke at the Canadian Institute of Financial Planners (CIFPs) annual national conference in Ottawa on Wednesday.
"The better opportunities for investing in equity markets are found internationally," he said.
Global growth will likely remain positive, but somewhat sluggish, this year, coming in at a little more than 3%. In fact, Zyblock expects to see a broad-based improvement in corporate earnings this year with a global growth rate of about 10%. The "real juice" for corporate earnings in 2017, however, will come from Europe.
After about a decade of rolling crises and concerns about sovereign debt defaults, Zyblock expects European earnings to be strong in a number of countries. For example, corporate earnings in Spain are expected to grow by 33% while corporate earnings in Italy could jump by 43%.
Canada and the U.S. will see some corporate earnings growth as well, but not as strong as in Europe, Zyblock said. For example, U.S. companies are at a more mature point in the market cycle with higher margins; as such corporate earnings growth will likely be around 10%. Furthermore, Zyblock is concerned that the price/earnings valuations in the U.S. equity market are approaching historically high levels.
In Canada, Zyblock is not as interested in investing in the market because of the housing bubbles in Vancouver and Toronto and their potential negative impact on the domestic economy should there be a correction.
"For everyone that is happy about Toronto and Vancouver housing prices, stay very, very invested in Canadian equities," says Zyblock. "If you're scared to death of housing prices, like me … lighten up on Canadian equities, go somewhere else."
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