Scotiabank strategist Hugo Ste-Marie believes profit estimates for the TSX are far too optimistic and set to be revised lower, providing a significant overhang to the domestic stock market in 2024.
The strategist has specific concerns about the banking sector. He notes that provisions for credit losses , which are subtracted directly from earnings, have exceeded analyst expectations for the past two quarters. Growth in PCLs will have to stabilize before sentiment improves in this all-important sector.
Scotiabank’s pessimism on earnings is in part predicated on their belief in a slowing domestic economy next year. Higher-than-expected growth would, of course, help offset their anxiety about profit growth. Even so, investors should pay careful attention to the reliability of their earnings growth assumptions for portfolio holdings.This is the Globe Investor newsletter, published three times each week.
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