Investors should underweight Canadian equities, but load up on banks: BMO GAM chief investment officer

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Sadiq Adatia predicts where the TSX and the loonie are heading next

Heightened bullish sentiment has helped lift the S&P/TSX Composite Index nearly 2,000 points, or about 8 per cent, since Sept. 6. Today, the Bank of Canada slashed the overnight rate by half a percentage point, providing a tailwind for stocks.

The Bank of Canada has started the process of cutting interest rates. We see that continuing for the foreseeable future. I think because expectations are not high generally on the market, I think the earnings are fair and reasonable. When I look at the energy sector, I would say US$70 to US$80 a barrel is fair value to us. We’re neutral on energy because we’re sitting in that US$70 to US$80 range but we would be buyers if we drop below US$70 and would be sellers if we got closer to US$85 or US$90.

Within the mining sector, you lowered your gold outlook but still have a slight overweight call.

Silver is the other one that could get a little bit of positivity there, but we prefer gold over silver.I think the TSX will have a little bit more of a challenging time. I see probably somewhere between zero and a 3 per cent return on the TSX.

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