Manley adds that this potentially challenging outlook extends to Canadian equities despite their remarkable rebound since volatility earlier this year and given that the TSX is outperforming the S&P 500, year-to-date.
“The nature of this performance suggests that the market itself is not primed for longer-term success: nearly half of YTD returns are from the Materials sector (buoyed by strong gold demand, as EM central banks look to “de-dollarize”), which might see structural support but nothing that will touch US growth equity performance prospects,” he says. “Moreover, the TSX has become more expensive, and the valuation argument that used to be so powerful is no longer compelling, with the energy sector the only significant component of the market trading at something of a discount.”
On energy, Manley says geopolitics might push oil prices higher, which would be supportive of that…
