Canadian Markets May Face Bumpy Ride

Late-cycle tailwinds should support modest positive returns for Canadian equities in 2018, though volatility is expected to increase as markets consider the timing of the next recession, according to the “Canada Market Perspective” in Russell Investments’ 2018 Global Market Outlook, BusinessWire reported. Russell Investments strategists expect moderate economic growth for Canada as several growth factors from 2017 moderate. The Bank of Canada will likely raise its target rate once in 2018, intentionally lagging the US Federal Reserve to prevent another episode of sustained Canadian dollar strength. Despite the bank’s constrained position, Canadian bond yields should trend higher in sympathy with the more aggressive tightening action expected from the US Federal Reserve. “The prospect of recession in Canada remains at bay for 2018, but Canadian investors should expect a bumpy ride and a fair bit of uncertainty with the housing market, NAFTA trade discussions and the potential for over-tightening by the bank’s representing key downside risks,” said Toronto-based Shailesh Kshatriya, director, Canadian strategies at Russell Investments Canada Limited.