The Canadian and U.S. markets need to be looked at cautiously by investors in 2013, according to John Priestman, managing director, Guardian Capital LP, speaking as part of a panel discussion at the Fall Income Roadshow 2012 on Friday.
“The bull market that we’ve been in since early March 2009,” he said at the Toronto-based event, “is getting pretty long in the tooth.”
Priestman expects there to be a market correction of 10% to 12% in the coming year. This correction will likely happen as a result of the recent de-acceleration of corporate profits and continuing lacklustre growth. “We’ve been living in a 2% world,” he said. “Two per cent economic growth, 2% inflation, 2% interest rates and, in the recent quarter, in the S&P 500 the top line growth was 2%.”
As well, 60% of companies in the S&P 500 expect slower rates of profitability and revenue growth in the future, he said.
To further complicate matters, is the fiscal cliff or, as Priestman prefers to call it, austerity measures. Decisions made in regards to the fiscal cliff will affect every American taxpayer and corporation and therefore the stock market, he said. The ongoing problem is that the United States will still face a huge deficit regardless as to what the government decides on.
The one silver lining for Priestman is the time of year. Typically, December is the strongest month of the year for markets, he said, with January and February generally doing well also.
“I hope that [scenario] plays out,” said Priestman. “If it does we’ll be using that market strength to take some profit to build up cash and become a bit more cautious and defensive.”