(September 8) – Is the TSE set for a fall? Not according to BMO Nesbitt Burns senior economist Doug Porter.
The fall is a notoriously bad time for equity markets. September has been by far the weakest month of the year over the past 20 years, according to Porter. But he says there is plenty of reason for optimism this year. “Both technical and fundamental factors continue to provide a significant tailwind for the TSE 300,” says Porter, while also arguing that the traditional September swoon is getting less harmful each year.
The other big concern is valuation. The TSE has been 2000’s strongest market. The TSE 300 is currently 15% above its 200-day moving average, and up 55% over the last 12 months. It is also up 45% on the S&P 500.
This performance is keeping the party rolling, drawing in record foreign investment and sparking renewed interest in domestic equity funds. Liquidity remains positive and earnings growth is supportive too, “bolstering the view that the stock price surge is sustainable”.
The domestic economy looks good too, Porter says, noting that the U.S. slowdown will be partly offset by huge corporate investment and renewed personal spending in the wake of tax cuts and income growth. “Despite concerns about seasonal weakness and overbought conditions, the economic and financial backdrop is still constructive for equities.”
-IE Staff