With continued interest rate cuts by the U.S. Federal Reserve, the U.S. economy will accelerate rather than decline, according to Jeff Rubin, CIBC World Markets' chief strategist and chief economist.
Rubin said in his monthly Canadian Portfolio Strategy Outlook that the U.S. economy is far healthier than Wall Street believes. He predicted that after a slowdown in the first half of 2008, shortened by continued rate cuts in the U.S., economic growth is likely to increase with resource and energy stocks forecast to see a bump in their share prices.
Until that happens, however, Rubin said he is cutting CIBC's equity investment portfolio exposure by 3%. He's also reducing the bank's investment in financial stocks by 1% until the impact of sub-prime investments by Canadian banks is fully realized.
Despite volatility in the markets, Rubin was still bullish about equities, expecting stocks to outperform other asset classes over the next year.
Rubin is maintaining his target gold price of US$900 over the next year, citing expectations of lower U.S. interest rates, a week U.S. dollar and strong overseas demand for the precious metal.