The median forecast in a survey of 26 portfolio managers and strategists was for the record-setting S&P/TSX Composite index to rise 5.8% to 18,175 by the end of 2020 from Tuesday's close of 17,177.37. That is up from a forecast of 17,625 in November's poll.
However, most responses came in before the steep sell-off in global stocks in the first two days of this week as investors began to seriously fret about the coronavirus epidemic's potential damage to the global economy.
The index has gained 0.7% since the start of the year after climbing 19.1% in 2019. Last Thursday, it notched a record high at 17,970.51 but has tumbled since as the coronavirus outbreak spread.
The estimated earnings growth rate for the Toronto market has increased to 6.9% in the current fiscal year from an estimated 3.6% in fiscal year 2019. The price-earnings ratio, based on estimated earnings for the upcoming four quarters, has climbed to 12.7 from about 11.5 at the start of January, I/B/E/S data from Refinitiv showed.
By the middle of 2021, investors expect the TSX to reach 18,500, the poll showed.
The global economy appeared poised to pick up this year after being held back by trade uncertainty in 2019, but that outlook has been put at risk by China's coronavirus epidemic. Investors worry slower than expected economic activity could hurt prospects for corporate earnings.
"Sectors that rely on China for their revenues and manufacturing will be mostly affected," said Lea El-Hage, an economist at Laurentian Bank Securities. "These include energy, materials, industrials and consumer discretionary."
Those four sectors account for about 42% of the Toronto market, according to Refinitiv Eikon data.
With a 9.5% decline, energy has been the worst performing sector since the start of the year. The price of oil has fallen more than 20% from its January peak.
The second worst-performing sector has been healthcare, down nearly 9%, which includes once high-flying cannabis shares, while the interest rate-sensitive utilities sector has been the top performer with a gain of more than 12%.
Next best has been technology, up 8%, led by huge gains for commerce platform provider Shopify Inc.
Gold shares have advanced more than 9%, helped by a seven-year high for the yellow metal after major central banks, such as the Federal Reserve and European Central Bank, eased monetary policy last year in moves that also helped boost stock markets.
"Broader fundamentals remain good and interest rates remain low," said Sadiq Adatia, chief investment officer at Sun Life Global Investments. "There is a Fed put (option) and even potential for a BoC put that should keep a floor under the markets."
A put option is an instrument that provides investors with downside protection.
Last month, the Bank of Canada opened the door to an interest rate cut should a recent slowdown in domestic growth persist.
By Fergal Smith