BofA Securities quantitative strategist Ohsung Kwon believes the Canadian economy bottomed in November 2023 and is “now in a clear upturn,” with the TSX set to outperform the S&P 500.
Mr. Kwon’s predictive model for domestic growth relative to the United States, the Canada Cycle Indicator (CCI), analyzes government bond yields, analyst earnings revisions, inflation, commodity prices and Organisation for Economic Co-operation and Development (OECD) leading indicators. The strategist notes that the CCI has been a reliable predictor of TSX versus S&P 500 returns.
Sharp improvement in the OECD leading indicators for Canada and commodity prices are the main reasons for the upturn in Mr. Kwon’s model. In addition, BofA Securities economists believe that the Bank of Canada key lending rate, which is currently half a percentage point lower than the equivalent Federal Reserve rate, will be 1.5 percentage points lower by the end of…
