BMO Manager: Evidence for a severe economic slowdown is not there

“Rather than dwell on day-to-day issues and concerns, it’s wiser to simply focus on bottom-up stock-picking”, says Lutz Zeitler

Michael Ryval 3 January, 2019 | 6:00PM

While equity market sentiment continues to be bleak, Lutz Zeitler argues that the evidence for a significant economic slowdown is lacking. As a consequence, Zeitler is continuing to invest in a select group of companies that he believes have solid long-term fundamentals.

“A lot of the time we see concerns that drive market sentiment, either positive or negative. Right now it’s negative, and it is based on ‘concerns,’” says Zeitler, managing director and head of Canadian fundamental equities at Toronto-based BMO Asset Management Inc. “There are concerns about trade wars, Brexit, and general economic growth. But the evidence for a severe economic slowdown is not there. We are still seeing positive leading economic indicators.”

One bellwether is the ISM, or Institute for Supply Management, which monitors views of purchasing managers and had a reading of 59.3 points on December 1, a small drop from 60.3 a month earlier. Expectations were for 57.5 points. “My point is that market sentiment is so weak and expectations are so low by market participants,” says Zeitler, noting that volatility has shot up to levels last seen in February 2018 when inflation fears sent markets into a tizzy. “But housing data in Canada and employment growth remain strong. There is no evidence that we are in for a severe slowdown.”

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Brookfield Asset Management Inc Class A43.41 USD2.69
Brookfield Infrastructure Partners LP54.85 CAD7.02
TJX Companies Inc47.49 USD1.46

About Author

Michael Ryval

Michael Ryval