Even before completely coming out of the most recent financial meltdown, especially for equity investors, analysts are already pointing out the prospects of 2012. Not a single equity investor may have the tenacity to forget the 2007/2008 economic meltdown when the financials were down by 7 percent (Kothari, 2010), the overall market fell by 11 percent, and stocks held by banks remained virtually flat (Kahn, 2008). Cook (2012), in his article: Canada’s Banks May Still Be Best TSX Bet for 2012 opens up one of the most debated topics of the new-year, at least for the part of the investors.
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In this incisive article, Cook argues that despite being hit by a high profile downgrade, the conservative Canadian banks may offer a better investment option for Canadian investors. This is because analysts argue that “the financial sector, whose shares outperformed the overall market in 2011, is unlikely to fall much, and yet have the potential to profit from any market recovery” (Cook, 2012).
The author proceeds to argue that instead of walking the same successful path as in 2011, investors should focus on depressed sectors that have the capacity to grow, such as banks. Furthermore, Canadian banks offer better dividends and maintained the same levels during the financial crisis period. Whereas concerns have been raised on the possible impacts of the Eurozone economic crisis on the Canadian domestic market, Cook argues that most of these impacts will be felt on growth-sensitive sectors of the economy such as mining and energy. However, the underlying fact, according to Cook (2012), is that investors should avoid commodity-linked stocks indefinitely.
Kothari, V. (2010). Executive Greed: Examining Business Failures that Contributed to the Economic Crisis. New York: Palgrave Macmillan.
Kahn, S. D. (2008). A systemic crisis demands systemic solutions. The Financial Times, pp. A2, A8-A9.
Cook, J. (2012). Canada’s Banks May Still Be Best TSX Bet for 2012. International Business News. Web.