Canadian stocks are expected to reverse year-to-date losses and eke out low single-digit returns in 2011, boosted by an improving economy, solid earnings and fewer global headwinds, a Reuters poll found.
But the forecast for Canada's main stock index reflects a meager outcome compared to the impressive double-digit returns of the last two years.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE, which has fallen about 3% this year and almost 9% since the 2011 high reached in March, was seen ending 2011 a modest 2.5% higher at 13,775, according to the median forecast of 30 analysts and fund managers in a poll taken over the past week.
That was well below the median end-2011 target of 14,500 in a March poll, and would mark a sharp slowdown compared to the 14.5% advance for the TSX in 2010, and nearly 31% gain in 2009.
Economic reports from the United States, Canada's largest trading partner, have been disappointing. They include soft U.S. gross domestic product, manufacturing and employment numbers. Data this week also showed the U.S. housing market is still struggling to regain its footing.
Meanwhile, Canadian consumers are keeping a tighter grip on their cash as households remain deeply in debt.
And commodity prices, as measured by the Thomson Reuters-Jefferies CRB index, have fallen sharply from the year-to-date high reached May 2. Energy and materials stocks, including gold and base metal miners, make up about half of the composite index's value.
While some negative catalysts such as Japan's earthquake and tsunami have diminished, there are no shortage of other risks ahead. These include possible Greek and U.S. debt defaults, Middle East unrest, and the end of the Federal Reserve's massive quantitative easing program.
In one year from now, the poll predicts the TSX will climb to 14,250, about another 3.4% higher than the end-of-year target.
Estimates for the index heading into the end of the year ranged from 11,750 to 15,400 -- reflecting significant uncertainty and potential volatility ahead. For the mid-2012 forecast, the range was 11,800 to 16,000.
Many of the analysts polled said recently punished energy and bank stocks will lead the way higher.
Most forecasters also predicted this year's trough is still to come. They said the index could fall to anywhere between 11,500 and 12,500, lows not seen since last year, between now and October.
