Investors should prefer the Canadian TSX Composite benchmark index in 2024 to the S & P 500 , according to Bank of America. The Wall Street bank said that with inflation and geopolitical risks rearing their heads again in 2024, the TSX is expected to outperform the U.S. benchmark. Last year, while inflation was moderating, the TSX underperformed the S & P 500 by 16 percentage points. However, the Canadian index beat the S & P 500 in 2022 when inflation was investors’ prime concern. .GSPTSE 1Y line “Inflation is among the biggest risks in 2024. Own TSX at 15x PE,” said Bank of America’s Canada equity and quant strategist Ohsung Kwon, referring to the TSX’s forward price-to-earnings ratio. According to FactSet, the P/E currently stands at 15.75x, lower than the 20.28x of the S & P 500. Canadian investors can access the index through the near-identical iShares Core S & P/TSX Capped Composite Index ETF and BMO S & P/TSX Capped Composite Index ETF . The iShares Canadian-dollar-denominated fund also trades over the counter in the United States. The investment bank sees the TSX as a hedge against inflation and geopolitics, the two biggest perceived equity risks cited by fund managers recently surveyed by the bank. “Canada offers a great hedge against both. The three historical upcycles in the TSX relative to the S & P 500 occurred during inflationary cycles, and two of those were during wartime: the 1940s (WWII) and 1970s (Yom Kippur + Vietnam). War is inflationary,” Kwon added. “This is consistent with the 1970’s inflation regime when the relative performance of TSX vs. SPX moved closely with inflation (86% correlation in 1986-81 vs. 26% for the full history since 1928),” Kwon said in a note to clients on Feb. 5. “With the near-record growth differential between Canada and the U.S. expected to narrow and much of disinflation already taken place, we believe the TSX offers a great entry point.” The bank highlighted the TSX’s dividend yield of 3.2% as a key attraction, which is more than double the S & P 500’s 1.4% yield, according to FactSet data. “We believe 2024 could be a banner year for dividends as cash yields drop and a global recovery cycle lifts beaten-down high dividend stocks,” Kwon said.
FOLLOW US ON GOOGLE NEWS
Read original article here
Denial of responsibility! Chronicles Live is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email –
chronicleslive.com. The content will be deleted within 24 hours.
