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Oil, the slippery variable in Canadian economic forecasts, is what's dampening the outlook of the economists at the country's major banks. With the prolonged weakness in crude, most see muted growth in the Canadian economy in 2016.

A number of the banks' investment strategists, however, are willing to predict that Canadian equities will have a far better year: Of the four who have published an explicit target for the S&P/TSX composite index for year-end 2016, three say the return will best that of the S&P 500. And two of those forecasts, from National Bank Financial and BMO Nesbitt Burns, imply returns of 13 per cent to 15 per cent, respectively. Returns like that would make Canadian stocks the clear winner.

Brian Belski, BMO's chief equity strategist, says his bank's forecast has been met "with significant skepticism" from clients this month "as energy and material prices are now hitting new cycle lows and negativity toward Canada has resurfaced." Mr. Belski, however, says his group's view "remains firm," and a recovery that BMO expected in the fourth quarter will instead begin in 2016, making Canada a "surprise outperformer."

Speaking of surprises: Many doubt the accuracy and relevance of economic forecasts, and 2015 helped fuel the fire. As detailed in Globe Investor last week, the big-bank economists premised their 2015 numbers on an oil recovery that didn't arrive. The oil collapse threw off everything else in their outlooks, from interest rates to gross domestic product (GDP) to the value of the Canadian dollar.

It's also worth noting the 2016 forecasts referred to in this article were issued at varying points in the fall: RBC Dominion Securities Inc., which is the most optimistic on oil at $58 (U.S.) a barrel for West Texas intermediate crude, and therefore on Canadian GDP (2.2 per cent, the only forecast of the six above 1.8 per cent), issued its outlook Nov. 20. The deeply disappointing performance of oil in the weeks since is reflected in other forecasts, some issued as recently as 10 days ago. (And there's room for revision: CIBC World Markets Inc. economist Avery Shenfeld says his bank's $50 average is "under review in the wake of recent bearish data.")

CIBC's portfolio strategist Ian de Verteuil cut his 2016 forecast for the S&P/TSX composite to 13,750 from 16,250 on Dec. 17, saying 2016 "will likely be another tricky year for Canadian and U.S. equity markets" after 2015 became "the year when many stocks became 'energy derivatives' – save for growth companies." The entire S&P/TSX composite now has a correlation to oil that is two times to three times higher than it was 10 years ago, given the higher proportion of energy stocks in the index and the increased sensitivity of the Canadian banks to moves in oil prices, he says.

Including 2015, energy has now underperformed the broader market in eight of the past 10 years, he notes, and he's wondering whether today's depressed levels mean the streak might end: He's moved the sector up to "market weight" for 2016 from an "underweight" rating.

CIBC still counts financials as one of its recommended Canadian sectors, along with industrials and information technology. "Underweight" sectors include health care, telecom services and utilities.

Vincent Delisle of Scotia Capital Inc. has set price targets for the S&P 500 and S&P/TSX composite that imply a small outperformance for Canadian stocks – in part, he says, because of the potential for a reversal in recent gains for the U.S. dollar. His 2016 game plan is to move toward higher exposure to resource companies and cyclical stocks while moving away from the S&P 500.

Stéfane Marion of National Bank Financial is the lead author of the second-most-optimistic forecast for Canadian equities: a 15,000 S&P/TSX composite mark at the end of 2016, versus a 2,200 for the S&P 500 that implies a 6-per-cent gain. Mr. Marion believes that with the U.S. economy still growing, economies of emerging countries and the euro zone surprising on the upside in recent weeks and China beginning to exceed expectations, "global growth could surprise on the upside in 2016." With the U.S. Fed's recent rate increase digested by the markets, he says, "we think commodity prices could show some lift in the coming months, supporting Canadian and emerging-market equities."

National Bank's recommendation is to "overweight" Canadian bank stocks, as employment gains support the housing market and prevent a deterioration of household creditworthiness. Other industries on his "overweight" list: paper and forest products, capital goods, consumer durables and apparel, insurance, software and services.

Mr. Belski at BMO argues Canadian stocks can outperform U.S. stocks, even without energy and materials leading the way. He says BMO's analysis is that 25 per cent of the time that the S&P/TSX composite has managed to outperform the S&P 500, the energy and materials sectors were laggards. Most of the outperforming periods, he says, came immediately after "sentiment had shifted sharply against Canada relative to the U.S. – much like the current environment.

"The 'Eeyore' market continues, as most Canadian-centric investors continue to focus on the doom-and-gloom trade," he says. Most global investment managers, too, are "now grossly underweight Canadian equities and were net sellers through the summer.

"We believe any positive news stemming from emerging markets, Europe and commodity prices will likely be a strong positive tailwind for Canadian stocks," Mr. Belski says. That would include, one supposes, oil prices rebounding to a degree that makes most of the 2016 economic forecasts wrong.

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