Uncertainty could temper Canadian economic growth, says Russell Investments in its 2018 Global Market Outlook 1 Q2 Update released March 28. The report says the Canadian economy could grow nearly two per cent, but that inflation, rising mortgage costs, domestic oil prices and the outcome of NAFTA negotiations could temper growth.
“Trade uncertainties are weighing on investor sentiment and the discount applied to Canadian crude is a serious blow to the economy,” said Shailesh Kshatriya, director, Canadian strategies, Russell Investments. “Restrained optimism in the markets combined with low unemployment, firming wage growth and double-digit corporate earnings growth could result in the BoC being more dovish relative to the industry consensus. We remain neutral toward domestic equities and believe the 10-year Canadian bond yield may have a modest upside from current levels.”
Globally, the market will see complicated conditions after a volatile start to the year due to US tax cuts, synchronized global growth and strong corporate profits, up against monetary tightening and inflation pressures. Increased protectionism is also viewed as a risk, but a full-blown trade war is unlikely, says the Outlook report.
“We continue to see Europe, Japan and emerging markets outperforming the U.S. in what could be a relatively flat year for global equities,” said Andrew Pease, global head of investment strategy at Russell Investments. “We are still looking to add risk into market pull-backs, but we recognize that ‘buying the dips’ may become more challenging as markets grow more sensitive to recession risks later in the year.”
To learn more, consult the 2018 Global Market Outlook – Q2 Update.