The TSX, Canada’s main stock exchange, has been on an incredible run since the broader markets bottomed in March 2020 from the COVID-19-fuelled crash. Since then, the TSX has advanced an eye-watering 85% and is trading in record territory. While some analysts believe the wobbly bull market is poised for a correction, the majority of Canadian portfolio managers believe the TSX will extend its record setting rally into 2022.
How Is the TSX Expected to Perform in 2022?
Right now, the TSX is trading at around 20,635 and is up 17.5% year-to-date but is expected to trend steadily higher over the coming 12-months. In a recent poll, portfolio managers and strategists were asked where they thought the TSX would be over the next 16 months.
The median prediction is for the TSX to end 2021 at 20,050, which is actually slightly lower than where it is as of this writing. But those same analysts believe the TSX will advance to 22,000 by the end of 2022.
Keep in mind, Bay Street and Wall Street analysts are notoriously conservative, so those projections could be a little low.
They believe the TSX will extend its record rally as the global economic expansion fuels growth in corporate earnings. There is reason to be optimistic that the Canadian economy will expand at an above average pace. The Bank of Canada expects the economy to grow six percent in 2021 and 4.6% in 2022.
Not only that, but corporate profits are also expected to continue rising at a fast pace. This is encouraging when you consider the global economy hasn’t fully reopened yet. And interest rates are still near record lows.
In fact, the TSX and the rest of the North American markets surged to record levels on August 27th after the U.S. Federal Reserve chair hinted it was in no rush to begin reducing its generous monetary policy.
Jerome Powell said he is confident that this year’s soaring inflation, which is at its highest reading in decades, is temporary. While the Federal Reserve is expected to reverse its bond-buying purchases later this year, it will not impact interest rates.
This will be a boon for technology stocks, which do well in a low interest rate environment. The opening up of the global economy will also benefit cyclical stocks, including resource shares.
The TSX could experience some short-term headwinds though. First, there is the Federal Election on September 20, and stocks do not like uncertainty. Mail-in voting will also delay the results, which could compound the uncertainty.
Prime Minister Justin Trudeau also said on the campaign trail that he will raise the corporate income tax rate by three percentage points to 18% for banks and insurance companies that earn over $1 billion. If elected, investors can expect to see banking and financial stocks take a short-term hit.
Once we get through the August to October period, which is the seasonally weakest period for the TSX, the index is expected to continue to march into record territory.
Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses
The TSX is at record levels, and while it will face headwinds over the coming weeks and months, Canada’s benchmark index is expected to end the year on a high note and extend its record setting rally in 2022. While the record run will not benefit every stock or sector, the trading professionals at Learn-To-Trade.com can show you which ones will.
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