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Canada Stock Market’s Sharp Rally Can Run Longer Than S&P 500’s

David Rosenberg, founder and president at Rosenberg Research, joins us and talks about that it is time to shift from S&P500 to TSX.

(Bloomberg) -- The rally in Canadian stocks this year could run longer than the one going on in US equities, offering encouragement for American investors to look North, according to Toronto’s Rosenberg Research.

“US-based investors should strongly consider moving from New York to Toronto,” Rosenberg Research founder and president David Rosenberg wrote in a note to clients Tuesday, citing Canada’s favorable long-term stock market momentum outlook.

US equity momentum is expected to peak in December and then “be in a confirmed downtrend by January-February,” Rosenberg wrote, whereas the TSX “seems to still have enough energy to continue into early next year.”

For the reversal to happen, investors would have to take profits in the S&P 500, which is up 22% this year, and buy into the lower valuations in the S&P/TSX Composite, which has gained 17%. Beyond momentum, Rosenberg said the S&P/TSX offers a 30% discount in price-to-earnings compared with the S&P 500, as well as a dividend yield that’s “more than double that of the S&P 500.” 

The S&P/TSX set dozens of record highs this year aided by Bank of Canada rate cuts, surging commodity prices and tech sector growth.

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