It’s not easy to be conflicted at the best of times. And these are not the best of times, as recession fears crowd the markets. But Brian Belsky, chief investment strategist at BMO Capital Markets, is ready to kick his neck.
“People are worried about stagnation, and I’ve usually found in my long career, that when everyone is talking about a certain thing, you want to go the other way,” he said in an interview on Tuesday after the turbulent trading session ended. The S&P 500 saw a drop of about 2.2 percent on the day before regaining its losing ground to close with small gains.
Once again, recession fears were front and center, pushing traders into the perceived safety of the US dollar and sending WTI crude down 10.1 percent, pushing the commodity price below $100 a barrel.
Belsky cited strong employment levels as one of the reasons for his condemnation: In Canada, unemployment fell to a record low of 5.1 per cent in May, and Bay Street expects it to remain steady at that level when Statistics Canada released its June workforce survey. Friday. In the United States, the unemployment rate is 3.6 percent.
Belsky also said he thinks inflation could fall much faster than most people think, and that the upcoming earnings season could surprise the rally.
“We continue to believe that US companies have set themselves up to deliver on promises and over-delivery, and we believe the consumer is still overly strong,” he said.
Belsky’s conviction puts him at odds with the grim warnings that have been echoed as investors, economists and strategists question the ability of central banks to carry out a soft landing while raising interest rates to combat inflation well above desirable levels. .
“It seems to me – again, in the realm of probability and risk assessment – that this recession is just beginning,” David Rosenberg, head of Rosenberg Research, said in an interview Monday.
Rosenberg, who famously predicted the US housing market crash that led to the 2008-2009 financial crisis, said the stock market typically heads into a recession between two-thirds and three-quarters of the way — suggesting there is plenty of downside to come. . At the close of trading on Tuesday, the S&P 500 is down 19.6 percent this year, while the S&P/TSX Composite is down 11.3 percent.
Rosenberg warned that the “blow of the recession” was not yet reflected in earnings or analyst estimates, which he said could be the trigger for the next 20 percent drop in the stock market.
“It’s impossible to really know in terms of volume how bad this bear market is. I think almost half is over,” he said.
Belsky sees the investment landscape differently. He said on Tuesday that he stands by his call for TSX to reach 24,000 points this year, which is up nearly 30 percent from Tuesday’s close.
“Those who want to be defensive should have been defensive in February and March,” he said.
“Usually and historically, when there is a lot of fear in the street, now is the time to be optimistic. Whatever it was, it has been a humble year for us. We were wrong to be too optimistic to be looking at the long term. I still think that Over the next year or two, the stock will be much higher.”