BMO Harris Private Banking Market Outlook: Progress Made in 2012 to
Have Positive Impact on Global Markets in 2013
- More resilient European framework restores stability and confidence
- U.S. Fiscal Cliff averted; confrontation postponed
- China's money and credit growth stabilizes
- Good news expected from Canadian and U.S. equity markets
TORONTO, ONTARIO -- (Marketwire) -- 01/14/13 -- As the New Year
commences, BMO Harris Private Banking's latest Market Outlook
Commentary Report reveals that the world's market and economic
situation is in better shape now than it was 12 months ago.
The report notes that several factors have led to this positive
outlook, including the economic accomplishments of policymakers in
Europe, the United States, China and Canada, ongoing recovery in
China and a stronger U.S. economy. The combination of these
developments is expected to improve U.S. equity markets and a rise in
energy and commodity prices, in turn, positively impacting Canadian
Highlights from the report include:
Europe's sovereign-debt challenges came to the fore in early 2012,
but the year closed with a clear path forward. Austerity programs,
though necessary, were not enough and led to violent protests;
through hard work, however, policymakers made tremendous progress by
-- Europeans now have a communal agreement on banking supervision
throughout the region.
-- Communication among all constituents vastly improved and has gone a long
way to restoring confidence.
-- There was considerable movement towards stability.
"European leaders have made more improvements in 2012 than anyone
could have imagined a year ago, yet Europe has not fully recovered,"
said Richard Mason, Head of Investment Management at BMO Harris
Private Banking. "More work is required before markets in Germany,
France and several Eurozone countries regain confidence and the
region begins to grow again. Still, it is very encouraging that there
is a sustainable framework in place."
Progress in the United States
The U.S. Federal Reserve effectively set the tone for policy clarity
in 2012, with politicians making substantial inroads in the important
area of tax reform through the fiscal cliff negotiations:
-- Monetary policy will be tied to the unemployment rate.
-- A 6.5 per cent unemployment target means rates will remain low for at
least another year.
-- The dreaded Fiscal Cliff was averted through last-minute legislation,
resulting in tax hikes for higher income earners, some relief for
middle-class wage earners and no immediate spending cuts. In turn, the
"Rather than create a 'grand bargain' that linked spending cuts to
tax reform, legislators made a wise move by postponing the deadline
for the cuts that would kick in automatically," said Mr. Mason. "It
will be interesting to see what transpires over the next few weeks
and months, as it could have a ripple effect throughout the world."
A Soft Landing for China
In 2012, analysts voiced concerns that China's economy was doing far
worse than the reported numbers indicated. However, as a result of
the efforts of hard-line policymakers, money and credit growth have
stabilized and many measures of economic activity have moved higher.
Still, the country has room for growth in 2013.
"It is expected that 300 million people in China will migrate from
rural to urban communities by 2025," stated Mr. Mason. "This will
continue to have a significant impact on demand for, and the prices
of, commodities, but does not expose China to the potential for
Canada Maintains Steady Course
Two events shaped Canada's economy in 2012. The Bank of Canada
maintained its steady course of low interest rates, providing further
incentive for business development. In addition, the federal
government introduced tighter rules for longer-term mortgages that
have cooled the housing market. Analysts will watch closely to see
how this plays out in 2013. Further, the report notes that good news
is expected for the Canadian and U.S. equity markets.
"With stronger economies in China and the U.S., we anticipate an
increase in energy and commodity prices that, in turn, will
positively impact Canadian equity markets," said Mr. Mason. "U.S.
equities are also expected to have a good year; U.S. monetary policy
remains supportive, and the growing strength of the housing market
and consumer and corporate sentiment improves day-by-day."
To view the full report, please visit:
Get the latest BMO press releases via Twitter by following @BMOmedia.
Rachael McKay, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver
Press spacebar to pause and continue. Press esc to stop.