CIBC Chief Economist: TSX Will Hit 11,000 by Year's End

The stock market will continue to shrug off bad economic news, such as Friday’s drop in employment in Canada and the United States, because it has already priced in something much worse, Jeff Rubin, the chief economist and strategist at CIBC World Markets says.

“The bad news is that we are in a recession, and a fairly deep one at that. The good news is that the stock market has already discounted a depression,” he says in his latest Canadian Portfolio Strategy Outlook Report.

As a result, he expects the “slightest pulses in second-half growth” in 2009 to drive the TSX up to 11,000 by the end of the year. The recovery would likely be helped by government fiscal stimulus packages.

“Stocks can only cheer as businesses and households will be force-fed stimulus money from governments that will no longer care about deficits,” says Mr. Rubin. He said deep interest rate cuts and fiscal stimulus efforts around the globe would likely cause global growth to return by the second half of 2009.

Oil prices will also rebound along with the economic recovery. “If $40-$50 per barrel is the price of oil in a deep global recession, it shouldn’t be too hard to figure out why our portfolio is four points overweight energy stocks,” he says.

But with conditions to remain soft in the short-term, Mr. Rubin is keeping his equities portfolio at market weight for now. He recommends underweight positions in sectors most exposed to downside economic risks, especially in companies linked to consumer discretionary spending and autos. He recommends overweight positions in some of the traditional safe havens, such as utilities and consumer staples.

Comments

[know nothing:]

Lookout,when nations have no regards for deficits, thats a scary statement. If a buisness has no regards for incurring deficits, no fear of spending no respect for the debt they incur,they go bankrupt! Well most buisnesses anyway, except the buisnesses the goverment owns, or bails out. The funny thing is, the buisnesses the gov't bails out are still only as strong as the gov't that bailed them out. I would think the goverment would have learned something from these failed buisnesses that they just bailed out,if you don't control your spending ,you go bankrupt,you fail! It is often viewed that people with money may be wiser than other people. But it is suprisine=g that this article indicates that that may be a misconception. Anyone who invests in the stock market based on this artical will recieve what they deserve! "A Fool and his money are soon parted" as it should be!!!

Jan 11 09:37 AM

[herbert hoover:]

EVERYONE - I mean EVERYONE - is projecting a turnaround in the second half of the year. I'd hate to own any equities in September if that expected turnaround doesn't materialize.

Jan 11 10:00 AM

[Rob Viglione:]

"Everyone" is predicting 3Q09 because that's standard fare in the prediction business...you know things are bad now, so you have to discount at least two quarters, but we know absolutely nothing about three quarters away...perfect range on which to slap an arbitrary prediction. It also happens to correspond with roughly the time at which people will have forgotten your prediction. Oh, and it also gives a quarter buffer at which time you can reverse your prediction and push out another two quarters.


On Jan 11 10:00 AM Herbert Hoover wrote:

> EVERYONE - I mean EVERYONE - is projecting a turnaround in the second
> half of the year. I'd hate to own any equities in September if that
> expected turnaround doesn't materialize.

Jan 11 12:55 PM

[jepittman:]

Not only that but since the equity markets lead the economy by several months the stock markets will be higher well before then. Second half may still be a little early but the market will sniff it out well before it happens. When its obvious to you and me the market will have known it for some time.


On Jan 11 10:00 AM Herbert Hoover wrote:

> EVERYONE - I mean EVERYONE - is projecting a turnaround in the second
> half of the year. I'd hate to own any equities in September if that
> expected turnaround doesn't materialize.

Jan 11 04:14 PM

[benevolent ...:]

If the proclamation is not delivered with quantifiable ratios with mutiple corroborating reliable resources then we should classify as gossip(-where is the accountability?)

Jan 11 09:02 PM

[standfast77:]

Can you please add a spell checker to the comment page.

BTW it's spelled b-u-s-i-n-e-s-s

War, the needy bankrupt's last resort

Jan 11 09:52 PM

[Alex Ikonnikov:]

Never trust a chief economist from a bank who has suffered the worst losses of all Canadian banks!

Jan 11 10:59 PM

[davcnslt:]

Maybe a "younginvestor" but at least wise enough to consider the source.


On Jan 11 10:59 PM younginvestor wrote:

> Never trust a chief economist from a bank who has suffered the worst
> losses of all Canadian banks!

Jan 12 05:09 AM

[Did U Think...:]

I think the shrugging off is about to end. This bear market rally since Nov is long in the tooth and the saviour Obama has already told us many of his campaign promises were bull$hit. Now he is going to create 4 mn jobs for us. Mcjobs maybe, but nothing any self respecting man would want to work at.

The moneyman cited in the article said we are in a "fairly deep recession". I would like to nominate him for understatement of the decade.

Jan 12 06:51 PM

[Dividend Inc:]

I guess the numbers don't lie, Mr. Rubin was pretty close with his year end estimates.

Some might suggest that the reasons for the increase in market were due to manipulation (i.e. money injections). Additionally, some would accurately point out that the bias of most analysts is always bullish. However, with the TSX at 11,464, I believe that Mr. Rubin earned his pay.

Nov 28 09:04 PM