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Canaccord Adams is putting the downside risk for the TSX and the S&P 500 at 10 to 20 per cent in its latest portfolio forecast, resulting in a "slightly negative" 12-month target for the TSX, compared with current levels, and a roughly flat target for the S&P 500. Market declines will be "short, sharp and nasty," much like they were during the most recent bouts of credit turmoil in 1987 and 1998, write strategists Nick Majendie and Michael Rudd. They figure the risk of a U.S. recession starting some time in the latter part of 2007 exceeds 50 per cent, and is "likely as high as two in three." And they predict the U.S. federal funds rate will be 3.75 per cent in 12 months, compared with 5.25 per cent now. Over the past quarter, CA has moved to an overall "underweight" position in commodities, with "extremely high liquidity" in its three main portfolios, they point out, adding that "buy" targets have been established at lower levels for 25 blue-chip stocks and five income trusts.

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