Toronto Shares Breach 20,000 on Reopening Bets, Energy Gains

(Bloomberg) -- Canada’s main stock index rose above 20,000 for the first time, aided by a gain in energy shares, a rotation to value stocks and global economies emerging from the depths of Covid-19 lockdowns.

The S&P/Toronto Stock Exchange Composite Index is up 14% this year, with value- and commodity-oriented sectors at the helm. Canada’s technology leaders, such as Shopify Inc., shined through the early innings of Covid-19 lockdowns, then lagged behind as investors shunned growth stocks to capitalize on economic reopenings. The index rose as much as 1.4% intraday to 20,014.70.

Massive government and central bank spending has helped propel stocks higher, some Canadian money managers said.

Ryan Bushell of Newhaven Asset Management said investors shouldn’t doubt the “power of the coordinated action of global central banks and governments.”

“I wouldn’t be surprised that stocks continue to go up here,” Jean-François Tardif, president of Timelo Investment Management, said on BNN Bloomberg.

Canadian earnings have also been strong, prompting Bank of Montreal’s chief investment strategist to affirm a year-end price target of 20,500 for the TSX. Brian Belski says BMO’s year-end earnings-per-share target of C$1,180 could prove low if results continue on their upward trajectory this year.

“First-quarter earnings season has been another blow-out quarter, with S&P/TSX companies beating estimates by almost 8% on average, marking the fourth consecutive quarter of record-setting beats,” Belski said in a note to clients.

Technicals are also pointing to further gains for the TSX, according to Canaccord Genuity Corp. “A new short-term (2-4 week) rally phase is underway as the TSX Composite just broke out to new highs out of a multiweek-long consolidation,” quantitative and technical analyst Javed Mirza told clients in a note. “First resistance and next upside technical target near 20,500,” Mirza added.

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