Over the last several years, taking risks didn’t pay off.
“You’d have been better off in bonds than in equities,” says Leo de Bever, CEO of Alberta Investment Management Corp.
But de Bever, a speaker at the CFA Society Calgary’s 36th annual forecast dinner last week, says that’s about to change.
“The scenario for bonds is either terrible or really terrible. There’s not much upside,” he told the audience of 1,100 at the Calgary Telus Convention Centre.
By comparison, he expects stocks will perform below their historical averages, but still around 4% over the next two-to-five years.
He also disagrees with pessimists who point to fiscal problems and demographics as predictors of low economic growth.
“There is acceleration in innovation going on,” de Bever says. “The only question is whether we in North America, Alberta and Canada can capture our share of that technology change. I am absolutely convinced we can do a much better job at taking resources and using them in a way that is more energy efficient.”
Panellist Ira Gluskin, co-founder and vice chairman of Gluskin Sheff + Associates, is also optimistic.
“I don’t find the climate that bad at all,” he says. “Despite everything you read, things are actually getting better.”
The event’s third speaker, Jan Stuart, managing director and head of energy commodity research, fixed income at Credit Suisse in New York, agrees.
“Great progress has been made in Europe on the political front. It lays the foundation for a less-than-bad performance in 2013,” he says.
During the discussion, the panellists were asked whether the U.S. will become energy independent. Stuart says the answer is no.
“How is the U.S. going to become the next Middle East of oil?” he asks. “If you want to remain independent, you’re going to need oil from the oilsands and oil from abroad — just less of it. The U.S. isn’t going to become independent of oil; no way.”
Stuart says the Keystone XL pipeline will eventually be approved. But, he adds, “Canada has a real problem in getting crude oil out. Access to markets is uncertain.”
For his part, de Bever suggests considering alternative oil transportation methods if Keystone XL doesn’t get approved.
“Right now, doing anything other than pipelines isn’t going to work — rail transportation doesn’t have the capacity as it stands now,” he notes.
The speakers also questioned whether digging up oil with current technology is the most profitable strategy. After all, keeping it in the ground until people figure out what to do with it could be a better way of doing things.
But de Bever points out when it comes to infrastructure and transportation, “we should get better at focusing on what ultimately matters. If you’re interested in driving economic growth and prosperity, you can’t sit forever on every decision.”
Stuart’s 12-month forecast for Brent crude is $125 U.S., and West Texas Intermediate (WTI) at $116 U.S. De Bever sees WTI unchanged or lower because there’s much more supply than demand.
Gluskin predicted natural gas prices would reach $3.47 per mcf. And while Stuart sees “terrific growth in the long term,” he’s bearish in the short term.
De Bever sees more upside. “Natural gas is a more friendly fuel than a lot of alternatives,” he says. “In the long run the use of natural gas in more applications will eventually drive up the price.”
In terms of the Canadian stock market, Gluskin is “neutral on Canada” and calls for the TSX to remain “dead flat” this year, while Stuart sees the S&P 500 at 1,650.
And de Bever believes the loonie has already appreciated as much as can be expected. In terms of gold, “my guess would be it’s not going to go anywhere,” he adds.