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business briefing

Briefing highlights

  • I told you so: BMO
  • Stocks, loonie, oil at a glance
  • U.S. economic growth picks up
  • Uber to price IPO
  • Required Reading

BMO enjoys told-you-so moment

Investment strategists at Bank of Montreal are enjoying an I-told-you-so moment after the Toronto stock market’s ascent to new heights.

Chief investment strategist Brian Belski has oft called for gains on the benchmark S&P/TSX Composite Index even as it faltered. Now, he has been shown to be right.

“So how did we stick with our forecast for new price highs when odds were so squarely against us?” said Mr. Belski and his colleague, investment strategist Ryan Bohren.

“Three words: process, discipline and faith.”

The TSX is now within sight of Mr. Belski’s 2019 target of 17,000. He said he’s holding to that call, as he is his bull case scenario of 20,500 and his bear scenario of 14,000.

“Admittedly, the path to new highs for the TSX has been bumpy, doubted and downright belittled, to say the least,” Mr. Belski and Mr. Bohren said in this week’s report.

“To state that nearly no one saw this coming is akin to queuing the broken record of investor pessimism that has defined equity investing for nearly 20 years, in our view,” they added.

“Adding fuel to the negativity is the fact that this ride to new highs has not been easy, with the TSX experiencing more frequent and deeper corrections since the 2009 lows than in all previous bull markets since 1980. Indeed, much of this volatility has come from the inconsistency in emerging market growth and underlying commodities.”

So where do we go from here, according to BMO?

“We have learned that fundamentals and perspective are almost always victorious over macro fears and rhetoric,” Mr. Belski and Mr. Bohren said.

“Indeed, despite headwinds, TSX earnings continue to hit record highs, and stocks are posting solid returns without the participation of the resource sectors,” they added.

“As such, we believe investors should continue to focus on areas that offer relative stability, strong cash flow generation, and have an increasing exposure to U.S.-centric growth.”

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Markets at a glance

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U.S. growth picks up

The U.S. economy expanded at an annual pace of 3.2 per cent in the first quarter, a showing that topped the expectations of analysts.

Driving that expansion in gross domestic product were inventory buildups, trade and government spending, while business and consumer spending slowed.

“The composition of growth isn’t particularly solid,” said Royal Bank of Canada senior economist Nathan Janzen.

“More than half of the headline 3.2-per-cent GDP gain came from a lumpy surge in net exports and a build in inventories – neither of which is likely to be repeated any time soon,” he added.

“But a 1.2-per-cent increase in consumer spending also looks understated given rising wages and still-strong employment growth trends.”

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Uber to unveil IPO terms

From Reuters: Uber Technologies Inc. will unveil terms for its initial public offering today, telling investors it will seek to be valued at between US$80-billion and US$90-billion, according to people familiar with the matter. Uber will unveil an IPO price range of between US$44 and US$50 per share.


Required Reading

African leaders head to China

Despite repeated U.S. attacks on China’s lending practices, African leaders flew to Beijing this week to seek more loans. Even if Western criticism remains sharp and Chinese influence could become risky, African governments have decided they need the money. Africa bureau chief Geoffrey York reports.

Privacy commissioner takes on Facebook

Canada’s privacy commissioner is taking Facebook to court over data breaches. Bill Curry and Tamsin McMahon look at the issues.

The catch

Personal finance columnist Rob Carrick writes on suburban living, and the 25-per-cent-off sale in the housing market that comes with a catch.

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