Watch the full episode of Zachary Curry’s appearance on Market Call on BNN Bloomberg. The President and Portfolio Manager at Davis Rea Investment Counsel gives his market outlook, takes viewer questions and provides his Top Picks.

Zach’s Market Outlook

Since spring, the world’ economies have been reopening and activity has rebounded strongly. However, we’re now transitioning to the recuperation phase, where the sectors most sensitive to the virus will only reopen gradually and the impact of business and household insolvencies will be felt.

As a result, economic growth will be slower and more dependent on the path COVID takes. With second waves under way in many nations and third waves being a possibility, growth will be more uneven.

The economic rebound has boosted commodity prices and corporate earnings, but both will follow more uneven recovery paths in the recuperation phase. The Canadian dollar is likely to follow commodity prices higher since Canadian and U.S. short-term interest rates are likely to remain locked at current levels.

Equity markets have recovered strongly since late March, with tech-heavy indexes like the S&P 500 hitting new highs and other indexes getting close. As the world’s economies transition to recuperation, the upward trajectory in equity prices is likely to slow.

More volatility is very probable, especially with the U.S. election poised to be hard-fought and contentious and Brexit heading for a crescendo. Low interest rates should support valuations and, with earnings recovering, equity prices are expected to trend higher.

Economically sensitive sectors are expected to outperform, especially the more growth-oriented names with strong balance sheets.

Policymakers have done much to support their economies during this ordeal. This is likely to continue. Central bankers have reduced short-term interest rates to near zero and, with inflation likely to remain low, they are likely to keep them low through 2022 or possibly longer.

They’re also likely to continue buying bonds to keep yields as low as possible.

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