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Canadian Investors Could Ride Out Volatility

While consensus forecasts are for a mild recession in Canada in 2023, HSBC Canada Asset Management’s ‘Outlook for January 2023’ says there are still many factors that point to avoiding a deeper recession. On balance, it sees Canadian investors weathering the current volatility better than most because of a continuing strong job market, high consumer savings levels, robust commodity prices, and solid corporate earnings. The global earnings picture is less positive in many markets outside Canada, it says. Around the world, economic momentum continues to slow, with the Eurozone and UK in recession, U.S. growth well below normal, and China’s 2023 recovery likely to be shallow. From a cyclical perspective, it foresees a possible bottoming of global economic data around the second or third quarters of the year, but little upward economic momentum from there. On the earnings side, consensus forecasts need to come down further, but once analysts forecast zero earnings growth or a small earnings recession, and earnings momentum stabilizes, this could be the signal for markets that enough pessimism is priced in. This would be a key milestone allowing investors to add back equities and take a less defensive sector stance, it says.

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