BMO’s Belski Sees Canada Profit Melting Before Big Stock Bounce

(Bloomberg) -- One of Canada’s staunchest bulls is cutting his profit forecast for the country’s S&P/TSX Composite Index by 10% but is keeping his year-end target in place -- at more than 5,000 points higher from here.

Brian Belski, chief investment strategist at Bank of Montreal, cut his earnings per share target to a “bear-case scenario” level as the oil price shock and a coronavirus lead to mounting concerns about a recession.

“While we continue to believe the economy, markets and earnings will recover from the shock of the coronavirus (Covid-19 virus), there is no denying the fundamental impact of lower oil prices on the overall Canadian earnings environment,” Belski said

The bank cut its 2020 earnings target to C$1,020 from C$1,140, said chief investment strategist, Brian Belski in a report published Monday.

Belski isn’t revising his target on the S&P/TSX level, which sits at 18,200. The benchmark index fell 8.4% as of 3:25 p.m. in Toronto on Monday to 12,570.14. Belski upgraded real estate stocks to overweight from market weight, maintains energy and financials at overweight.

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“While investments, let alone society, have been gripped by the fear of the lasting effects of Covid-19 virus, we firmly believe this too shall pass and remain committed to perspective and analytically driven messaging as opposed to fear-laden headlines and the natural impulse to react,” Belski said.

Canadian stocks entered a bear market last week and are now down about 30% since their peak in February.

The BMO strategist has had a knack for nailing year-end forecasts for Canadian stocks. Last year, he predicted the benchmark would end the year at 17,000, about 63 points from where it actually ended. His forecast for the S&P/TSX in 2017 was only 1%, or about 200 points below the final closing number. Belski’s 2016 forecast was even more spot on, coming within just 12 points, or 0.1%, of the close.

In 2018, his estimate was off by a wide margin as Canadian stocks careened toward their biggest annual plunge since the 2008 financial crisis, ending the year more than 3,000 points, or 22%, below his forecast.

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