The screens at the TMX Broadcast Centre in Toronto show the closing numbers of the TSX at + 252.19 on Tuesday, July 3, 2012.
The S&P/TSX composite index is poised for a strong 2014, after turmoil in gold, financials and telecoms made it a laggard to the U.S. S&P 500, CIBC analyst Benjamin Tal says.
The Toronto stock index has risen by 6 per cent year to date, while the U.S, benchmark index has gained 22 per cent.
"Over the past two decades, whenever the TSX lagged the S&P 500 by a wide margin, it rebounded by an average of no less than 16 per cent in the following year," Mr. Tal said in a note to clients. "And the coming year may be no exception — mainly given that the TSX underperformance reflected an array of events impacting a number of different sectors."
Mr. Tal says the TSX's forward price-to-earnings ratio of 13 is a point less than its long-term average, and is "reasonably priced."
"With the TSX not expensive by any stretch of the imagination, it is possible that Canadian stocks might surprise on the upside in the coming year," he said.
Here are the bright spots he sees:
Energy
-Oil prices are higher than $100 (U.S.).
-Oil by rail and the proposals for pipelines that run east to west have eased some concerns over oil sands bottlenecks that worsened in the debate over the planned Keystone XL pipeline.
Base metals
-China is the big buyer, and it has allayed fears for its economy by raising industrial production by 10 per cent and retail sales by 13 per cent.
Financials
-The odds of a steep housing market correction are "slim."
-Strong business credit activity has made up for a slowdown in household credit.
-Bond spreads are improving and banks are making more money.
Eric Atkins