Bank economists share optimism for 2020, despite international uncertainty


Canada’s top bank economists predict the country will see a few bright spots in 2020, even as the globe grapples with uncertainty in the Middle East and China.

The country will likely experience wins in the equity, housing and oil markets, leading economists told attendees at a Toronto breakfast put on by the Economic Club of Canada on Wednesday.

Avery Shenfeld, managing director and chief economist at CIBC Capital Markets, said he expects the Canadian equity market to slightly edge ahead of one of its biggest competitors.

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“We’ve gotten used to the fact that the Canadian equity market kind of trails the U.S. equity market year after year, but…this might be the year that they nudge their nose above the S&P 500 in terms of performance,” he said.

“It may not be a banner year, but still a bit better than the U.S.”

He believes profit growth may return to U.S. equities, but won’t repeat the strong year they had last year.

Equity markets face a number of uncertainties, including a November U.S. election and tensions between the U.S. and China, which are expected to sign a trade agreement next week. The U.S. is also embroiled in a standoff with Iran, which fired missiles at American military bases in Iraq on Tuesday in retaliation for a U.S. strike that killed Iranian general Qassem Soleimani last week, causing oil prices to rise.

Shenfeld believes oil could hover around $60 a barrel, which he called “still fairly profitable for the Canadian energy sector.”

If war breaks out, he suggested that rate may surge to $100.

The real win for the sector, he said, was greater clarity from the federal government and industry around plans for pipelines.

“That should help the oil companies look a little brighter by the end of the year,” Shenfeld said.

His BMO Financial Group counterpart, managing director and chief economist Douglas Porter, found optimism in the rise of housing sales and prices, federal fiscal policies supporting growth and firmer oil plans. He pushed back on rumours of an impending recession.

“We are not particularly downbeat on the outlook for 2020 for Canada,” he said. “Given the global uncertainties there is a possibility we could get pulled down if everyone else does, but I don’t see a Canada downturn developing.”

He was encouraged by Canadian population rates that “we have not seen in decades,” noting that in the last year the population grew by 1.5 per cent or 550,000 people, while the U.S. is experiencing its slowest growth rate in a century.

“There was about a quarter century where Canada and the U.S. were seeing almost identical population growth rates,” he said. “It’s a bit of a mixed blessing in terms of the economy, but it does set a firmer bid in terms of housing and consumer spending.”

Dawn Desjardins, Royal Bank of Canada’s vice-president and deputy chief economist, found some positives in the health of the labour market, but said “it is not without challenges.”

Technology is bound to disrupt the market and re-skilling will be key to keeping Canadians employed, she said. RBC has predicted 25 per cent of jobs will be heavily disrupted, and expects people to change jobs more frequently than they once did.

According to Desjardins, Canadians have the skills to step into new roles, but the country has to continue to put time and money into training young workers and continuing to evolve jobs.

She was heartened by the country seeing wage growth in recent months and noted that the country has had a 11-year streak for economic expansion.

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