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The financial market strategists at RBC Dominion Securities put plainly what many see as the key to 2015: "It's still a matter of US[A] and Them."

Specifically, that the U.S. economic recovery "is strong enough to shoulder what has been a jagged, and at times, inconsistent global recovery." Rather than relying on international trade, the U.S. rebound is a consumer story, the RBC strategists say. And that domestic strength should lead to higher stock U.S. prices in 2015, as well as U.S. demand that can pull many other countries along with it.

That thesis, in turn, supports generally rosy views about the Canadian economy and its equity markets.

Yes, the turmoil in the oil patch is expected to last well into 2015, with an attendant decline in capital expenditures by Canadian oil and gas concerns. But the view from many of the economists and strategists at Canada's Big Six banks is that a falling Canadian dollar, coupled with U.S. demand for Canadian exports, can go a long way toward offsetting those negative effects. As a result, their expectations for Canadian GDP growth have been trimmed, rather than chopped, in recent weeks.

That view, however, depends on at least some rebound in oil, which was still below $55 (U.S.) a barrel Friday. The banks' economists and strategists generally see oil at $65 to $70 a barrel in 2015.

Douglas Porter, chief economist at BMO Nesbitt Burns, notes that the oil industry represents one-third of Canada's private-sector investment, four times as important to the domestic economy than that of the United States. That means BMO's forecasts call for the U.S. economy to outpace Canada's by the biggest margin since 2003, and possibly 1996. "It's all about the oil," he says.

Before we continue, let's note that the economic and market forecasts from the mainstream, establishment institutions are generally positive, if not bullish. Calls for the markets to decline, or the economy to tip into recession, are the province of hedge funds or notably contrarian analysts who look prescient when things go wrong.

The past few years have not belonged to the pessimists, however.

"Admittedly, seven consecutive years without an annual loss is rare for U.S. stocks, but not totally unheard of based on history," say BMO's investment strategists, led by Brian Belski. "We continue to believe that the current bull market is part of a longer cycle that will eventually last 15 [to] 20 years in totality. Nonetheless, this has been a bull market whose underlying trend and proposed duration remains firmly doubted and distrusted by most of our clients, in our view. In other words, this is the largest stealth bull market of our collective careers, one that no one believes, and everyone is looking over their shoulder to diagnose its end."

BMO sees the Standard & Poor's 500 finishing 2015 at 2,250, a roughly 8 per cent gain from current levels. (BMO suggested a 12 per cent gain when it issued its forecast Dec. 1, but strong returns in the latter half of December have already provided one-third of the gain.) The 2,250 mark is nearly 18 times BMO's forecast for S&P 500 earnings, which, BMO, notes, is "slightly above-average valuation" that "makes significant gains more difficult." In addition, BMO says, expect more frequent volatility, which "strongly favours fundamental over momentum-based strategies."

BMO expects the S&P/TSX composite to finish 2015 at 15,600, about 7 per cent above current levels. That would be the fifth consecutive year the Canadian index underperforms the major U.S. one. "We expect Canada to become increasingly correlated to U.S. strength; however, sentiment around emerging markets and Europe will continue to drive broad swings above and below our target."

National Bank Financial pegs the S&P 500 at 2,200 at year-end 2015 and the S&P/TSX at 16,200 (implying the return on Canadian equities will be double that of the U.S.). Chief economist and strategist Stéfane Marion said that financial markets in mid-December were "[continuing] to ponder" the steep decline in oil. "For some, it is a clear symptom of a weakening global economy. … For others, declining energy prices are rooted in a supply-shock experiment from OPEC in order recapture lost market share."

"Since we have to choose a camp, we will side with the optimists," Mr. Marion said. "From our standpoint, the potential stimulus to households should not be underestimated."

The RBC equity strategists note that "while many investors are evaluated on a calendar year basis, investment themes tend to persist." As a result, they say, they begin their outlook "by asking why [and how] market behaviour will differ from last year." And their answer: The U.S. and global economic backdrops will be markedly similar, with oil being the big difference. "Our constructive 2015 outlook is predicated on an elongated economic cycle, which should drive multiples and earnings higher."

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