Recently, Agard Union Trading has released a report on ‘Will Canadian Equities Reign in 2022’. According to finance experts at Agard Union Trading, the Canadian stock market’s robust performance last year is expected to continue, with rising interest rates positioning the TSX to outperform U.S. equities markets throughout 2022.
Prior to 2021, the S&P 500 outperformed the S&P/TSX Composite index in nine of the previous ten years. Last year, the S&P/TSX trailed the S&P 500 on a total return basis, but it beat the Dow Jones Industrial Average, the NASDAQ, and the Russell 2000.
“This time last year, our market intelligence team forecast that Canadian equities would finally outperform their U.S. peers, and now they are even more confident than ever,” said Michael Woods, Agard Union Trading’s longstanding Director of Sales & Trading. “The TSX is close to one standard deviation below its long-term average, while the S&P 500 still looks expensive at 20 times forward price-to-earnings,” he added.
Over the last decade, U.S. tech giants have propelled growth and dominated the S&P 500, but that is now changing. The law of large numbers and the likelihood of increasing interest rates has made it difficult to sustain the previous impressive run.
The TSX, on the other hand, with its three key pillars of financials, energy and materials, is more cyclically balanced and more likely to profit from rising interest rates and post-pandemic economic recovery.
According to data gathered by Agard Union Trading, the Canadian energy sector has already made a strong comeback from its lows in 2020. Energy producers currently have record cash flows and are returning money to investors yet are still trading close to trough valuation. In addition, a strong rebound in employment has been aided by Canada’s vaccination rate and lower death rate, and immigration is also expected to increase growth over the coming year.
“We believe the TSX is exceptionally well-positioned to reign over U.S. equities this year. However, we still expect a challenging environment for equities moving forward. As a result, we are recommending our clients shift out of growth sectors of the market that have thrived during pandemic lockdowns, technology being the foremost among them, into cyclical, value-oriented sectors such as resources and financials where there is more room to run”, added Michael Woods.
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SOURCE: Agard Union Trading
Topic: Press release summary