Update: BofA Reportedly Favours Canada Stocks

Last Updated: Tuesday, June 22, 2021 5:08 PM | MT Newswires

Investors seeking to capitalize on economic reopening should look north of the border for a cheaper alternative to the "frothy" S&P 500, according to strategists at Bank of America Corp., Bloomberg News is reporting Tuesday.

Canada's S&P/TSX Composite Index has plenty of exposure to commodities and cyclical companies, while also trading at its steepest discount to the U.S. benchmark since the tech bubble more than 20 years ago, equity strategists led by Ohsung Kwon told clients in a note, cited by Bloomberg.

The Canadian index trades at 17 times forward earnings, a two standard deviation discount to the S&P 500, BofA said. The valuation gap "is overdone, especially when the composition of the TSX is much better positioned to benefit from the global economic recovery, which we believe is intact," Kwon said, adding that a discount of that size is usually an omen of TSX outperformance.

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