Executive Summary
2010 Winter Outlook
Stewart Hunt — Managing Director, Portfolio Advisory Group
It is always interesting to look back to see what we were saying at this time last year to determine how well our crystal ball was working. Our compliments to Vincent Delisle, Scotia Capital Portfolio Strategist, who at this time last year was calling for equity markets to retrace their November 2008 lows and subsequently rebound and ‘base build’ for the balance of the year. While the market low of March 2009 was below the market low of November 2008, it did mark the bottom from which the market
dramatically climbed back to finish in positive territory. Derek Holt, Vice President Scotia Capital Economics, last year predicted the global economy, and particularly the North American economy, would struggle to reach positive growth until the latter half of 2009 with the effects of massive fiscal stimulus having its full impact in 2010. Based on what has occurred over the past year both Delisle and Holt were very accurate with their predictions.
So what are we anticipating for 2010? Delisle, while still positive on the equity markets, believes we will see returns that will be more associated with the long-term equity returns of 8 -10%. Delisle sees these returns being achieved with cyclical stocks leading the way however, as the year moves on giving way to more defensive stocks as the markets adjust to higher interest rates and the gradual removal of government stimulus. While recommending being overweight equities and cash Delisle predicts a shift towards a more neutral asset allocation as the year progresses. Holt and the Scotia Economics department anticipate positive economic growth globally and in North America with the employment picture in Canada and the US improving. This will allow the Bank of Canada and the US Federal Reserve to begin removing market liquidity and the federal governments to begin reducing the flow of fiscal stimulus. As a result, Holt predicts interest rates will move higher in the latter half of 2010 and government spending will slow down.
As we move into the New Year here are some of the highlights of the Winter 2010 IPQ:
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