'Leave New York and come to Toronto': Canadian stocks are set to outperform the S&P 500, top economist says

• Canadian stocks are successful a amended spot than their US counterparts, economist David Rosenberg said.
• Both markets person rallied this year, but US stocks will apt inclination down successful 2025, he said.
• He pointed to long-run indicators successful nan US, for illustration diminishing yields and precocious valuations.

Stocks successful nan US and Canada person rallied this year, but Canadian shares look amended positioned for gains successful nan agelong run, according to economist David Rosenberg.

"Time to time off New York and travel to Toronto," Rosenberg said successful an question and reply pinch Bloomberg this week.

Rosenberg's position comes amid a rally for some markets, pinch nan S&P 500 surging 23% and nan Toronto Stock Exchange up 17%. In a statement to clients this month, Rosenberg forecast banal momentum successful nan US to highest successful December earlier trending downward by January aliases February, while nan TSX's rally seems apt to proceed into farther into adjacent year.

Rosenberg pointed to a assortment of semipermanent indicators that look to favour nan Canadian market.

As cardinal banks astir nan world statesman to easiness monetary policy, output has go scarce, Rosenberg says, pinch nan dividend output connected nan S&P 500 astatine conscionable 1.3%.

"You person a magnifying glass? It's almost astatine a grounds low," he said. In Canada, connected nan different hand, nan dividend output is much than double that of nan US astatine 3.3%.

At nan aforesaid time, US consequence assets person reached what immoderate reason are excessive valuations.

"The United States is nan poster kid for that," Rosenberg said, adding that nan price-to-earnings ratio of US stocks has expanded to historically precocious levels successful nan past year.

Historically precocious valuations make for a important value discount for nan TSX versus US stocks, and nan output and valuation advantages successful Canada versus nan US make for amended positioning successful nan agelong run, Rosenberg says.

"This is simply a comparative call, but Canada, I think, astatine a minimum, if you spell into a carnivore market, has overmuch much downside protection, conscionable based connected wherever nan valuations are," Rosenberg said.

Rosenberg has long called for a pullback pursuing nan US banal market's blistering rally successful complete nan past 2 years. He's warned that indicators person flashed nan aforesaid informing signs of "speculative mania" that preceded nan 2000 and 2008 marketplace crashes.

Rosenberg says nan S&P 500's projected EPS growth—17% per twelvemonth for nan adjacent 5 years—is capable to raise informing signs, and nan past clip that happened was conscionable earlier nan dot-com bubble burst successful 2000.

What's astir concerning to him successful nan US marketplace now, though, is simply a deficiency of diversification.

"What really has maine unnerved much successful nan US than immoderate different marketplace is nobody's rebalanced successful this full bull market," he said, adding, "Nobody's diversified, nobody's taken profits."