Canada’s economy is expected to grow by 2% in 2015, lagging behind the United States’ expected growth rate of 3%.
“The U.S. consumer has come alive, balance sheets have improved, and, as a result, you are seeing stronger auto sales and a stronger housing market,” says Scotiabank chief economist Warren Jestin. “The important thing to remember is that while low energy prices are bad news for producers of energy, they are good news for manufacturers and consumers who are seeing it at the pumps.”
However, he predicts Canada’s housing market will be softer, adding that prices are not going to be going up significantly and housing starts are going to be moving lower because we’ve had very buoyant activity for a number of years.
“On a positive note, slowdowns in Western Canada—Alberta and Saskatchewan—will be partially offset by stronger performance in Ontario as the U.S. market heats up,” Jestin explains.
Though oil-producing regions and countries will suffer more in 2015, for the broader global economy, lower energy costs should actually support growth, says portfolio strategist Vincent Delisle.
Unfortunately, he notes this puts Canada and the S&P/TSX Composite Index at a disadvantage relative to the U.S. and the S&P 500.
Still, the time is right for equities versus bonds.
“We still prefer equities over bonds for 2015, with a higher degree of confidence in the U.S. compared to Canada,” Delisle says. “Our Canadian equity sector strategy is focused on the sectors that typically outperform in periods of [Canadian dollar] weakness—life insurance, lumber, fertilizers, industrials, staples, technology and autos.”
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