In a new report, Jeff Rubin, chief strategist at CIBC World Markets Inc., says that it has boosted its target for both the TSX energy sector and the headline index.

“We’ve raised our TSX energy sector target this year to 2900, and given its nearly quarter weight in the index have bumped up our TSX year-end target to 10500,” the report notes. “But we remain market weight stocks, in expectation of only low single-digit gains in non-energy stocks.”

“In line with our higher target for oil and gas stocks we are raising our energy weighting in stocks to 30%, and within energy, favour a concentration in oils and producers,” it adds.

“Earnings multiples in the energy sector are on the move, and should continue to grow as the market’s long-term price expectations continually rise,” it predicts. “Rents accruing to oil producers (and investors) will soar, rivaling those paid during the OPEC supply shocks. No energy sector in the world is likely to be more attractive to investors seeking those rents and soaring earning multiples than the Canadian one.”

With the energy sector already up over 30% since the beginning of the year, CIBC says that its huge, and now increased, overweight in energy stocks, “has already given our equity portfolio a 145 basis point outperformance of the TSX Composite over the first half of the year.”

In addition, it remains double-weight income trusts. “As predicted at the beginning of the year, [trusts] are leading all asset classes in total return,” it says. “The trust market not only benefits from falling bond yields, but with a 40% weighting in oil and gas, is highly levered to energy prices. Up over 11% since the beginning of the year, our once aggressive call for a 20% total return from the CIBC World Markets Trust Index is now looking conservative. So too is our target for a 4% long Canada yield.”

CIBC also remains overweight fixed income, and in particular, long duration Government of Canada and provincial bonds.

Yet it is underweight materials stocks, industrials, and info-tech — areas where it believes there could be significant downside ahead. “Materials and industrial stocks have historically been victims of soaring oil prices through slowing global economic growth,” it reports. “Global industrial production has already decelerated from a soaring 8% pace last year to a more moderate 4.5% pace so far this year and should slow further in the quarters ahead.”

Also, tech stocks continue to trade at huge earnings multiples long after the industry has ceased to be a growth one, it notes. “Collectively, these three sectors have given investors a 5% loss over the first six months and are likely to continue to yield negative returns over the next six months,” it predicts.