Canadian stocks are expected to record their strongest performance since 2010 next year as the global economic recovery picks up pace, helping energy and mining shares regain their stride, a Reuters poll found. The median forecast in a poll of 39 market strategists taken in the past week showed the benchmark Toronto Stock Exchange's S&P/TSX composite index gaining 4.6 percent this year to reach 13,000.
It is then expected to climb nearly 6 percent from those levels to 13,755 by the end of 2014, which would be the biggest annual gain since a 14.4 percent rise in 2010.
"2011 was a washout, we were barely positive in 2012 and this is by no means a blockbuster year for the TSX," said Elvis Picardo, strategist at Global Securities.
The poll was taken in the middle of a partial shutdown of the US government, which has raised doubts about whether US politicians can negotiate a deal to raise Washington's borrowing limit. Most investors so far have assumed this would be resolved before too much damage is done to the markets.
Energy and mining companies weigh heavily on the TSE benchmark index, which slipped in the first half of 2013.
These companies will benefit from improved global growth, strategists said. They point to signs that China's economy is healing after a prolonged slowdown and the fact Europe is pulling itself out of a recession.
A rebound in the global economy should boost export demand and lift commodity prices, two driving forces of the Canadian market. The recent pullback in commodity prices was a major reason that the Canadian index lagged the S&P 500 for much of 2013, as it did in the previous two years.
Better growth in the global economy could boost earnings and revenue growth, taking some of the focus away from central bank policy that has dominated the market's attention this year.
"The real story next year is going to be how the global growth picture looks," said Craig Fehr, a strategist at Edward Jones. "2014 could really be about better GDP growth, which could provide a nice solid base for corporate profits."
"To a large extent, focus will be on the material and energy sectors, which have been the laggards," he added. "A reacceleration in China ... would be a real catalyst for global optimism and global markets."
A separate Reuters poll showed the S&P 500 gaining about 7 percent next year, according to the median forecast of analysts surveyed.
Global Securities' Picardo noted: "But we're coming to that point where incremental gains are going to be harder to come by for the S&P 500 purely because it's at such an elevated level," he said. "It will be easier for the TSX."
While investors don't expect the most bearish scenarios for the US debt impasse, such as a credit default to play out, they are eager to turn the page before stepping back in.
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