Market Call:

Paul Taylor, Senior Vice President and Chief Investment Officer, Asset Allocation, BMO Asset Management Canada

FOCUS: Canadian Equities

Market outlook:

Economic:

· Expect continued modest uptick in global economic trajectory

· U.S. will be bolstered by continuing strong employment gains and supportive monetary policy that are fuelling the purchase of big ticket items (homes and autos)

· Eurozone will benefit from the implementation of a quantitative easing program, from the tailwind of low oil prices and from a relatively weak currency

· Japan – numerous tailwinds to better economic growth include low oil prices, a weak currency, strong corporate governance reform, increased immigration efforts, freeing up the Government Pension Investment Fund to buy equities and the potential signing of the Trans-Pacific Partnership

Markets:

· Moderate upside in equities given the strong rally posted in the period post-global financial crisis

· P/E multiple expansion will be limited given that most markets no longer trade at a discount to longer term multiples

· EPS growth will be moderate, hence the moderate overall return outlook

· Our preference is (in order): Eurozone and Japan, the U.S. and then Canada

· Bonds represent poor value in the current environment

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