TSX outruns Wall Street on earnings growth prospects as global economy rebounds | Canada News Media
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TSX outruns Wall Street on earnings growth prospects as global economy rebounds

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Toronto Stock Exchange

Soaring earnings growth prospects for TSX index have raised portfolio managers’ confidence that the commodity-linked market’s move to a record high is justified and could boost the attraction for global investors who rushed in this year.

Analysts estimate that earnings for the TSX Composite, which notched a record high on Monday, will grow 45.2% in 2021, Refinitiv I/B/E/S data shows. That is the fastest pace in data going back to 2017 and runs ahead of the 36.9% rate for the S&P 500.

The level of growth reflects a rebound after earnings slumped 18.1% last year as well as a particularly favorable environment for Toronto-listed stocks, with many companies highly geared to economic activity. Growth was 3.3% in 2019, before the COVID-19 pandemic.

Among the sectors with the highest estimated growth this year are energy and industrials, at a 106.3% and 96.8% pace respectively. Shares of resource, industrial and other cyclical companies account for about 70% of the Toronto market, versus 40% of the S&P 500.

Earnings estimates feed into measures used by investors to assess value, such as the ratio of price to earnings. Strong growth tends to support a higher valuation.

“It’s all about earnings,” said Barry Schwartz, a portfolio manager at Baskin Financial Services. “If the earnings rise in concert with the stock price then you have a phenomenon where ‘Holy smokes my stocks have gone up,’ yet on a valuation basis they are no more expensive.”

At 13.8, the price-earnings multiple for the TSX has barely changed since the start of the year, according to the data. Meanwhile, the index has gained 16%, outpacing major U.S. indices.

FOREIGN INFLOWS

The S&P 500’s multiple is higher, at 22.2, reflecting a much heavier weighting in technology shares. But strategists at BofA Securities said last week that the discount for the Toronto market is overdone, especially because it is better-positioned to benefit from global economic recovery.

“If you believe that we’re on a multi-year tailwind for earnings growth, then you want to own those companies that are going to benefit,” Schwartz said.

Foreign investors appear to have caught on, with data from Statistics Canada showing that portfolio inflows into Canadian equities have jumped to C$28.6 billion ($23.2 billion) in the first four months of the year, the biggest inflow for the period since 2017. It follows outflows for the full year in 2019 and 2020.

“Global investors see the TSX as a way to benefit from the upturn in the global economy,” said Angelo Kourkafas, investment strategist at Edward Jones in St. Louis.

The IMF expects the global economy to expand 6% this year after contracting 3.3% in 2020. The improved outlook has bolstered commodity prices, including oil.

There are risks to the outlook, such as faster-than-expected interest rate hikes from central banks. But analysts expect earnings growth to extend into 2022, at a rate of 10.8% for the Composite index.

Last month, portfolio managers in a Reuters poll forecast the TSX would rise to 21,750 by the end of next year, about 8% above current levels.

“The market is pricing in earnings growth and that earnings growth will drive the majority of the index going forward,” said Kevin Headland, senior investment strategist at Manulife Investment Management.

($1 = 1.2321 Canadian dollars)

(Reporting by Fergal Smith,; Editing by Denny Thomas and Dan Grebler)

Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

The Canadian Press. All rights reserved.

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

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OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

The Canadian Press. All rights reserved.

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