The TSX had a rough end to 2014. What’s in store for 2015? A report from Aston Hill Asset Management offers guidance.
- The energy sector will be up, but only after a bumpy beginning. The price of oil will continue to be somewhat volatile early in 2015, gradually settling down and finishing the year around $60. This should provide enough support to the sector such that energy stock prices will be higher by the end of 2015.
- Forest products firms stand to benefit from the U.S. housing recovery. As the recovery continues, housing starts in the U.S. should increase.
- Canadian banks and life insurance companies should perform decently in 2015. Earnings and dividends should rise fast enough to show a return for these two heavyweight sub-sectors. As for the other large component, REITs should be able to grow their AFFO (Adjusted Funds From Operations) as the economy continues to grow and rents increase modestly.
- Consumer staples and telecoms are the beneficiaries of the safety trade out of resources. Expect to see their multiples contract as earnings continue to rise. This should result in these two sectors trading mostly sideways. One company that could buck this trend is Alimentation Couche-Tard, if they announce a large, accretive acquisition in 2015. Consumer discretionary should also do well in 2015 driven by the continued growth of the global auto industry and a better economy in general.
- Industrials is the most exciting. As the economy continues to improve, companies in this sector should do well. The only drawback to be mindful of is that a fair amount of the revenues these companies derive come from the energy sector. Industrials is disparate sector, with companies ranging from makers of satellites, to railroads, to engineering companies, so generalizations are hard to make. Overall, if the economy improves the sector as a whole should do well.
Click here for Aston Hill’s U.S. and global forecasts.