* TSX index seen at 16,050 by end-2017, at 15,704 by
* Gains in 2017 likely muted compared with 2016's rebound
By Alastair Sharp
TORONTO, Dec 7 Financial strategists expect
Canada's main stock index to rise more slowly in 2017 but to
reach an all-time high by the end of next year if U.S.
President-elect Donald Trump's tax and spending plans boost
economic growth, a Reuters poll found.
But risks to that outlook have multiplied, the respondents
said, citing Trump's protectionist talk on trade, a sharp jump
in global bond yields, and Canada's wobbly domestic economy as
reasons for caution.
Trump's election is "likely to lead to a selloff as
potential negative effects of actual policies become apparent in
an overvalued market," said Integris Pension Management Corp
Chief Strategist Gavin Graham, who expects Canadian stocks to
pull back in the second half of next year.
Trump has promised to cut taxes and spend on infrastructure,
which is good news for some Canadian companies, but he has also
said he would renegotiate international trade agreements. Canada
does the vast majority of its trade directly with its larger
southern neighbor and would also suffer if rising protectionism
stifled global growth.
The Toronto S&P/TSX composite index has rallied
about 30 percent since hitting a three-year low in January. The
Organization of the Petroleum Exporting Countries' landmark deal
last week to limit production has given more momentum to the
price of oil, a key Canadian export.
The median forecast from the Reuters poll of more than 20
strategists over the past week was for the TSX to rise more than
6 percent to 16,050 by the end of 2017 from Tuesday's close of
"I expect moderate gains in the domestic market, driven
primarily by a rebound in corporate profits as energy-sector
profits balance out from recent sharp declines," said Edward
Jones Canadian market strategist Craig Fehr.
Fehr said subdued domestic economic growth would probably
limit gains as a softening housing market, elevated debt and
choppy employment restrain consumer spending.
The index, which fell about 11 percent in 2015, should close
out 2016 at 15,113, up slightly more than 16 percent for the
year, according to the median forecast. It should get to 15,704
by mid-2017, the poll showed.
"We think that stocks are overdue for a correction, so the
first part of the year is likely to be weak," said Portfolio
Management Corp Managing Director Norman Levine. "But then
expect a stronger U.S. economy to drag Canada along."
Other risks to the Canadian outlook included a further rise
in global bond yields. That would "precipitate a chain of events
such as reduced consumer spending and consumer defaults, weaken
corporate earnings, cause greater flight into the U.S. dollar
and enhance the spread of populism politics," according to
Sprung Investment Management President Michael Sprung.
The Canadian dollar is expected to weaken throughout 2017,
according to a separate Reuters poll. And a third poll showed
global sovereign bond yields climbing, though more gradually
following the recent market rout.
(For poll data )
(For other stories from the Reuters global stock markets
(Editing by Ross Finley and Lisa Von Ahn)