BMO Harris Private Banking Market Outlook: Positive Signs Resonate Worldwide in
- U.S. housing sales, retail sales and job numbers strengthening
- Germany, Italy and Spain showing signs of economic improvement
- Growth in China expected to exceed 7.5 per cent in 2013
- Canadian investors seeing better returns on equities
TORONTO, ONTARIO -- (Marketwire) -- 02/22/13 -- BMO Harris Private
Banking's latest Market Outlook Commentary Report reveals that 2013
is off to a robust start with several positive developments in North
American and global markets.
The report notes that corporate earnings growth is on the upswing in
the U.S. and Canadian interest rates should remain stable. Overseas,
there has been minimal negative news to fuel Europe's sovereign debt
crisis further, while China's economy is in a good position for
Highlights from the report include:
U.S. Recovery Moves Ahead
Late 2012 featured an unpredictable few months: the Fiscal Cliff was
a real concern and the market reacted to that volatility. The next
phase of these debates, which will focus on the debt ceiling and the
borrowing limit for the U.S. federal Government, was moved off until
May 2013, helping keep markets calm from now until then.
"Delaying the Fiscal Cliff discussions was a prudent move, enabling
President Obama and Congress to address discretionary spending in a
meaningful way," said Richard Mason, Head of Investment Management at
BMO Harris Private Banking. "With talks and negotiations now
stretched out through to spring, the focus has shifted from anxiety
to relative calm, which has been buoyed by evidence of a sustained
The report reveals improvement in several other key areas in the
-- Earnings growth is on the upswing for the first time in nearly three
years, with forecasts calling for 2013 earnings to grow by 13.8 per
-- Housing sales, prices, inventories, retail sales and job numbers
continue to improve.
-- Cash flowing into equity funds has increased steadily since the start of
Europe Picks Up
According to the report, Europe's policymakers remain diligent in
attempting to ease the recession; however, their efforts are being
met with mixed
-- Yield spreads between German 10-year bonds and those of Italy and Spain
are continuing to narrow, signalling that these economies are
stabilizing and there is less of a perceived risk.
-- However, the International Monetary Fund projects economic slippage to
be 0.3 per cent lower than previously forecasted.
-- The IMF expects a sluggish recovery in 2014.
"European policymakers could become complacent as the economy shows
signs of improvement and may only respond to and address each crisis
as it arises," said Mr. Mason. "However, it's prudent that they use
this time to look closely at the issues that have hindered the
Eurozone until now, such as outsized government debt and high
China Continues to Show Improvement
The report reveals that the New Year has brought moderate economic
success to China, with growth expected to exceed 7.5 per cent for
2013. This is a result of several factors:
-- Improved manufacturing activity, along with better-than-expected GDP
growth in the fourth quarter, has invigorated both domestic and world
-- Policymakers' tightening of money supply and credit is likely coming to
-- Purchasing managers' index and retail sales have improved.
"Despite this commendable progress, China is at a relatively early
stage of economic development; we encourage investors to proceed with
caution," said Mr. Mason. "That being said, the country does posses
considerable untapped productive potential and an ability to increase
the amount of money and credit in circulation. It will be interesting
to see how the next few months unfold."
Modest Gains for Canada
Stability is the name of the game in Canada, according to the report.
Over the past few months, the housing market has started to cool -
mainly as a result of the mortgage-tightening rules introduced by the
government in July 2012. In addition, the Bank of Canada suggests
interest rates are expected to remain stable until late 2013 or early
As equity markets gained in the S&P 500 and S&P TSX, two Canadian
federal bonds were issued in early January 2013 - the five-year bond
yielding only 1.2 per cent and the 10-year at 1.5 per cent . However,
the bonds did little to attract investors as equities in the broader
market offered the potential for higher returns.
"From now through earnings season the signs are favourable for
stronger corporate earnings in Canada. It's also worth noting that
the return of NHL hockey has not only made fans happy, but seems to
be contributing to improved investor confidence in Canada," said Mr.
To view the full report, please visit:
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Rachael McKay, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver
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