Globe editors have posted this research report with permission of Scotia Capital Inc. This should not be construed as an endorsement of the report’s recommendations. For more on The Globe’s disclaimers please read here. The following is excerpted from the report:
Accelerating world GDP growth and Fed tapering should drive portfolio returns in 2014. We expect:
- improving economic news flow to bolster sentiment and equity flows;
- the upward normalization in bond yields to continue;
- monetary divergence to drive country/asset leadership; and
- asset correlations to mean-revert lower.
We see U.S. 10-Yr yields heading towards 3.5 per cent with a stronger greenback (C$ near US$0.90). Targets are set at 1,950 (S&P 500) and 14,200 (TSX).
We expect equities to outperform bonds by high single digit margin. Global leadership should stay with developed markets.
TSX strategy: Financials, Discretionary, Technology, and Industrials would be the focus. We reiterate our cautious stance in resources and our preference goes to Energy Services, Chemicals, and Forest Products.
S&P 500: Financials, Technology, and Industrials should extend their leadership in the first half of the year.
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