AI investing craze bypasses Canadian stock indexes, for now
BNN Bloomberg
The craze in artificial intelligence investing has bypassed Canadian equities markets and left its key index to chase higher-flying stocks in New York. Strategists in both countries think that will reverse in the second half of 2023.
The S&P/Toronto Stock Exchange Composite Index has eked out a 2.2 per cent gain so far this year, directly in line with the Dow Jones Industrial Average. But it has vastly underperformed the S&P 500, which is up 15 per cent, thanks to a surge in its biggest market sector — information technology — that’s been fueled by an AI investing bonanza.
BofA Securities Inc. strategist Ohsung Kwon ascribed 85 per cent of the divergence between the Canadian index and the US benchmark to the surge in tech. Going forward, however, he sees Canadian equities bouncing back and offering longer-term upside as well as a rotation from growth stocks — including in the tech sector — back into value stocks that Canadian markets are known for.
“We think that the old economy is going to be the big winner from AI,” he said, adding that sectors with larger weightings in Canada — like financials, materials and energy — will eventually enjoy efficiency benefits from AI without spending the money to develop it.
