You’ll be able to’t time a downturn
The writing could also be on the wall with respect to an financial downturn, however Tan says the timing of a recession stays ambiguous. The precise second of influence – whether or not it’s mid-2023, within the second half, or in 2024 – may have significant implications for asset costs.
“Presently, due to the excessive stage of uncertainty, we’re nonetheless fairly cautious,” she says.
The reopening of China is yet one more cloud within the crystal ball. Whereas there are indicators that inflation is moderating – Statistics Canada reported that headline CPI decelerated to six.3% in December, in comparison with 6.8% the earlier month – Tan says a resurgence in Chinese language demand may push inflation again up.
“We do not assume it may be that inflationary as a result of there wasn’t the identical stimulus in China as there was in Canada and the US, but it surely stays to be seen,” she says. “Alternatively, stronger progress in China is a web optimistic for world progress.”
In keeping with Tan, final 12 months’s broad market selloff had the impact of resetting valuations. Earnings expectations have come down, however the broad consensus view nonetheless requires a modest quantity of earnings progress for the TSX this 12 months. However due to the lingering danger of recession, she says there’s nonetheless appreciable draw back to that.