TORONTO, Jan. 22 /CNW/ - CIBC (CM: TSX; NYSE) - Sustained selling
pressure over the next six months will erase two years of gains on the TSX
before the index comes back to finish the year at the 13,000 mark, notes a new
CIBC World Markets report.
    "We see a mid-year low of 11,000 followed by a spirited 2,000 point
recovery over the second half of the year as central bank easing and a gradual
reduction in subprime mortgage refinancings allows the index to climb back,"
says Jeff Rubin, Chief Strategist and Chief Economist at CIBC World Markets in
his latest economic update.
    "With the subprime mortgage issue largely behind markets in 2009, and
still strong growth in overseas economies, an energy and resource-based TSX
should be in a position to rally in 2009," says Mr. Rubin.
    He is also lowering his forecast for the U.S. federal funds rate by 100
basis points to 2.5 percent by year-end. "We expect to see a succession of
50-bps cuts over the next two meetings," says Mr. Rubin. "While lower interest
rates will not in itself redress the problem of rising mortgage default rates
and falling housing prices in the U.S., it will help limit the fallout from
the subprime mortgage market on the broader economy and credit markets."
    Mr. Rubin also expects the Bank of Canada will cut rates aggressively
with the overnight target rate falling to three per cent.
    As a result of his revised targets for the TSX and interest rates, Mr.
Rubin is cutting his portfolio exposure to equities, by shifting nine
percentage of weighting to bonds from stocks.
    "While our new index weighting in equities is still vulnerable to
short-term corrections in North American stock markets, it reflects our
longer-term optimism about global energy and resource markets," says Mr.
Rubin.
    The complete CIBC World Markets report is available at:
    http://research.cibcwm.com/economic_public/download/fedjan08.pdf

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