Compared to the past few years, Canada’s economic star will not shine as brightly as other countries in 2013, according to an expert panel from Toronto-based Bank of Montreal.
Consumer debt, sluggish income growth and constrained business spending all mean Canadians should expect little economic growth in 2013, said Douglas Porter, deputy chief economist, BMO Capital Markets, in Toronto. Porter spoke as part of a BMO year-end panel.
“Overall we’re seeing slightly softer GDP growth of 1.8%,” said Porter, “and there’s probably going to be precious little improvement in employment and the government budget deficit.”
Meanwhile, Porter expects global markets to hit a modest 3.5% growth level with the U.S. in particular taking the lead. While the U.S. economy will probably get off to a slow start in 2013 because of the fiscal cliff situation, said Porter, the economy will be growing above 3% by the latter half of the year.
While experts predict sluggish growth for the Canadian economy in 2013, they see the overall North American market doing quite well. “Our view on North American stocks is that they are set to deliver another positive performance in 2013 with the U.S. setting the tone,” said Brian Belski, chief investment strategist, BMO Capital Markets, in New York.
In 2013, investors will flock to the U.S. market as a place of stability, said Belski, because earnings are at their strongest levels in a decade and company balance sheets have not been as robust as they are now since the 1950s.
In the U.S., Belski is particularly optimistic about the industrials, energy and technology sectors. In Canada, Belski has an overweight market weighting in financials and industrials.
Looking more specifically at asset classes, Paul Taylor, chief investment officer, fundamental equities, BMO Asset Management Inc. in Toronto, recommends a strong bias towards equities, specifically North American stocks.
Taylor describes the scenario as a “TINA” equity market, or “There Is No Alternative” to equities. In the North American market strong economic growth and capital market financial stability are almost assured, he said. Within equities, he said, investors should focus on dividend paying stocks and look for other income opportunities.