By Ketki Saxena
Investing.com -- Mackenzie Investments, one of Canada’s largest asset managers pared back its outlook for Canadian equities last week, amid growing concerns of a recession in Canada, particularly citing weakening commodities and a cooling housing market as factors that will pressure Canadian equities more than the U.S. market as global central banks remain hawkishly committed to taming inflation.
While downgrading its position on Canadian equities to neutral from overweight last week, Mackenzie is boosting its outlook on US shares to neutral from underweight.
“A lot of the cues that we’re seeing around the global economy, including the commitment to fighting inflation with higher interest rates and the speed at which the interest rate moves are happening, made us more cautious about the extent of the slowdown,” Lesley Marks, Mackenzie’s chief investment officer of equities, said in an interview.
“Canadian equities -- given their more highly cyclical nature -- could underperform.”
Marks also noted that Canada is particularly vulnerable to a slump in global commodity prices, which are already showing signs of weakness.
Marks also noted the cooling in Canada’s recently red hot housing market, a major economic sector and also psychologically crucial. Marks notes Canadians tie their level of wealth to their homes and, as prices fall, so will consumer willingness to spend on big ticket items, denting earnings.
“Housing prices have corrected significantly over the last four months and that has an impact on the balance sheet of Canadians, but also on consumer confidence”.
So far this year, the commodity-heavy S&P/TSX Composite index has easily outpaced the S&P 500 this year, driven largely by energy’s bull run for much of the year. The S&P/TSX is about 8% lower this year, while the S&P 500 has slumped 14%. However, the growth-stock heavy US gauge has been regaining ground in recent weeks amid better-than-expected earnings.