Already up 7% since the beginning of the year, the TSX is well on track to hitting his 13,200 year-end target, says this month’s CIBC World Markets Canadian Portfolio Strategy Report.

“While the TSX is already up 7% since the beginning of the year, valuations remain reasonable, supported by an expected 20% rise in operating earnings,” notes Jeff Rubin, Chief Strategist at CIBC World Markets. “Forward price multiples at just under 16 times earnings are not far off from historic norms and certainly not suggestive of any speculative bubble.”

As a result, Rubin is raising his stock weighting a percentage point to 58%, an eight-percentage-point overweight vs the CIBC World Markets Institutional all-asset benchmark.

Rubin is also raising his weightings for both energy and material stocks half a percentage point each. Both unusually warm Atlantic surface water temperatures, as well as the newly formed La Nina weather system in the Pacific, are expected to contribute to heightened storm intensity in the upcoming hurricane season.

Oil prices are expected to jump to over $70 per barrel during the second half of the year, as Gulf production is shut-in due to storm damage. The CIBC World Markets model strategy portfolio now holds an 8.5-percentage-point overweight in energy stocks.

Already up 6.5% over the first quarter of the year, Rubin expects the CIBC World Markets Income Trust index to post a 20% plus total return this year, supported by healthy cash distributions, historically low long bond yields and an almost 50% weighting in the energy sector. At 10%, the strategy portfolio is double-weighted income trusts.

CIBC World Markets recommends an underweight position in bonds and zero weighting in cash. Within equities, the strategy portfolio is underweight information technology, consumer discretionaries, consumer staples and telecommunications.

To date, the CIBC World Markets Strategy portfolio holds a 78 basis point outperformance over its institutional all-asset benchmark during the first three months of the year, while the equity portfolio holds a 32 basis point outperformance over the TSX benchmark. Last year, the heavily energy-weighted strategy equity portfolio outperformed the TSX benchmark by 277 basis points.