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| Avery Shenfeld, Chief Economist, CIBC World Markets Incorporated, a speaker at the marcus evans Canadian Institutional Investment Summit 2012, discusses his forecast for economic growth in the US and Canada for 2013. |
NEW YORK, N.Y., Sept 6, 2012 - (ACN Newswire) - New York, September 5, 2012 - The magic number for Canadian institutional investors to expect in terms of economic growth in 2013 is two per cent for both the US and Canada, says Avery Shenfeld, Chief Economist, CIBC World Markets Incorporated. Until global government policy uncertainties clear, investors should underweight the most cyclically-sensitive equities and emphasize less-cyclical equities and corporate bonds, he adds.
A speaker at the marcus evans Canadian Institutional Investment Summit 2012, in Gatineau-Ottawa, Quebec, October 15-16, Shenfeld highlights the market opportunities available for investors to overcome recent investment challenges.
- What challenges are ahead for Canadian institutional investors in 2013?
At the moment, no asset classes are positioned to generate impressive returns in 2013, so, to use a baseball analogy, investors will have to hit for singles rather than for home runs. Low yielding sovereign bonds are forcing investors to consider companies with solid earnings that can pay decent dividends, and selected corporate bonds.
It is not about avoiding equities outright, because in a modest global growth environment, there are equities that can generate a combination of dividends and capital gains that will look attractive in today's low bond yield environment.
- How can they take advantage of some of the investment opportunities in the market today?
Commodities and perhaps some of the related equities that do not have a lot of near-term upside at this point, as they typically do well in a stronger phase of the global business cycle. As a way out, investors should look for performance opportunities in services, real estate and other non-cyclicals. At some point in 2013, we expect enough progress on sovereign debt issues in Europe, fiscal issues in the US and stimulus in China to make it worth shifting to higher beta sectors, but we are not there yet.
Canada is one of the rare sovereigns with an AAA rating, and no immediate prospect of a downgrade. That gives it a fighting chance for its sovereign bonds to outperform US Treasuries at the long end of the curve, even with a less-dovish central bank.
- What is your forecast for the US and Canadian economy that could impact Canadian institutional investors?
The US and Canadian economies will grow by roughly two per cent, keeping unemployment rates roughly where they are. The central bank in the US will continue to provide stimulus through both low rates and alternative measures like quantitative easing, and the Bank of Canada will push off the timing of rate hikes until growth is more materially above 2 per cent. Short-term bond yields are likely to stay low as a result, but we could see an upward drift in long rates as fears of a global recession abate through 2013.
Fiscal tightening will be a key factor preventing an acceleration in US growth in 2013, and the spillover from that will also be a factor taming growth in Canada.
Even to achieve that moderate pace to growth, policy makers in Europe will have to do enough to avoid a global financial crisis tied to its sovereign debt and banking issues, and the US will have to delay some of the tax hikes and spending cuts scheduled for 2013. Keeping a watchful eye on policy developments will be key to investment performance in 2013.
- How are the drawbacks of the Eurocrisis being imported into the institutional investment space in Canada?
If Europe does not address its policy challenges, we could face defaults that go beyond Greece to larger economies in the region, and a string of bank failures, resulting in a significant hit to the global economy. The major crisis hotspots are slowly being tackled, and for investors it is a matter of waiting for enough insurance that Europe will get its economy moving again.
About the Canadian Institutional Investment Summit 2012
This unique forum will take place at the Hilton Lac-Leamy, Gatineau-Ottawa, Quebec, October 15-16, 2012. Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes presentations on the global investment landscape, how to use alternatives to lower risk and how to get yields with safe assets.For more information please send an email to info@marcusevanscy.com or visit the event website at www.ciisummit.com/AveryShenfeldInterview
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Contact:
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Topic: Research / Industry Report
Source: marcus evans Summits
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