ScotiaMcLeod’s Portfolio Advisory Group conducted a report, “Charting a Course with Cautious Optimism,” on the 2010 outlook for Canadian Equity Markets. Some highlights include:

Financials (Banks): “While it is conceivable the Canadian banks could fluctuate in price over the coming quarters as high expectations have already been built into their share prices, ScotiaMcLeod remains bullish on the Canadian banks and encourages investors to maintain their banks holdings as long as their weightings within their portfolio are appropriate.”

Energy (Crude Oil): Under-exploration over the past few years as a result of budget constraints is increasing reliance on unconventional resources that tend to be more costly to produce, and the eventual uptick in the global economy lends to the notion of higher crude prices over the longer term.

Technology: While most investors look south of the border for technology stocks due to very little choice among large capitalization names in Canada, ScotiaMcLeod continues to recommend Canadian industry champion Research in Motion (RIM) for long term shareholders.

Consumer Discretionary: Considering the Canadian economy came out of recession in the third quarter of 2009, there’s no reason investors shouldn’t look at this sector. While recovery could be sluggish, the Canadian economy will have enough momentum over the next 12 months to get consumers spending more and profits rising for Consumer Discretionary names.

Industrials: If goods are being produced overseas and resource demand is increasing then engineering services, railroad, and industrial equipment sectors are likely going to see an increase in business, which should translate into increased profitability. Investors in these sectors are encouraged to maintain their exposure, if not increase it, over the course of the next year if they are underweight.”