Media Advisory/ Interview Opportunity
BMO Financial Group’s Market Strategists Unveil Their Predictions for 2009

TORONTO & CHICAGO, December 22, 2008 – BMO Financial Group’s economists, market and commodity strategists in Canada and the United States give their predictions for 2009. Media can arrange interviews with our BMO strategists by calling
416-867-3996 or 312-461-6625.

Jack Ablin, Chief Investment Officer, Harris Private Bank

  • Deflation forces could give way to monetary and fiscal stimulus sooner than expected.
  • High quality bonds offer a relatively attractive yield as a conservative play, but investors should stay in shorter maturities.
  • Stocks are cheap on a multi-year basis, but investors need to focus on price-to-sales, not price-to-earnings.
  • The reflation trade should benefit stocks, Real Estate Investment Trusts and commodities, and high yield bonds.
  • High yield fixed income is the only asset class that pays you handsomely while you wait.
  • Attractive Sectors: Health Care, Staples, Utilities, Energy, Telecom.
  • Unattractive Sectors: Materials, Industrials.

Andrew Busch, BMO Capital Markets, Global FX Market Strategist

  • The US Federal Reserve will move away from cutting interest rates to a serious quantitative easing program by continuing to expand their balance sheet. The Fed’s first big steps down this path has been the announced program to purchase up to $500 billion in mortgage-backed securities.
  • Congress will extend loans to the private sector by forcing banks receiving new TARP funds to lend.
  • Unfortunately, the White House providing $17.4 billion in bailout funds to the auto industry won’t resolve their problems and the markets are very like to force the issue by pushing their stocks to new lows. This will necessitate another round of loans amidst restructuring that will see layoffs rise.
  • The incoming Obama administration will propose and Congress will pass a massive stimulus program. The total program will certainly be over $500 billion and may eventually reach $800 billion - $1 trillion.
  • The housing sector will stabilize and this will stabilize the credit markets. Already, housing starts and building permits have fallen to levels that should sharply reduce the inventory of unsold homes which drives the number of foreclosures. We should see dramatic improvement in housing inventories by mid-2009.
  • The US government will attempt to use every means and method imaginable to arrest the slide in the economy and in the housing market. This includes legal and non-legal attempts to create agencies and programs to re-start growth.

Bart Melek, BMO Capital Markets, Global Commodity Strategist

  • Sharp global slowdown and the quest for cash derail commodities. The onset of a recession in the world's highly industrialized nations and a material slowdown in the developing world is projected to erode demand for commodities ranging from copper to metallurgical coal to oil, keeping prices depressed for over a year.
  • Gold should remain relatively healthy, but a full sustainable rally is unlikely in the near term due to considerable global disinflationary pressures and possible additional aggressive interest rate cuts by central banks around the world that may fortify the US dollar.
  • Beyond 2009, very low interest rates and aggressive government spending (coming from China and the G7) are projected to place demand growth on a firmer footing. Furthermore, difficult credit conditions and the unsustainably low price environment for commodities such as copper and oil is expected to reduce current supply and impede the start up of new projects, eventually causing tight markets and higher prices.
  • In the long term, BMO projects that gold, base metals and energy are likely to get significant support from a weakening US trade-weighted dollar and higher trend inflation. Massive US budget deficits and concerns that monetary authorities will not soak up liquidity very quickly in the coming years are likely to move the greenback lower and drive inflation risks.

Douglas Porter, Deputy Chief Economist, BMO Nesbitt Burns

  • The global recession will extend through the first half of 2009 as the credit crisis runs its course, before growth recovers modestly in the second half of the year.
  • The US faces its worst recession in the post-war era as consumers strive to rebuild savings amid unprecedented wealth destruction. An expected modest recovery starting late in the year depends on an expected sizeable fiscal stimulus plan.
  • Canada will suffer its first recession in 17 years as a result of falling exports to the US and declining investment in the resource sector amid plunging commodity prices. A modest recovery should begin in the second half of the year, supported by a likely stimulative federal budget and previous deep interest rate cuts.
  • The Fed is expected to keep overnight rates near zero in 2009. Meantime, the Bank of Canada is expected to reduce overnight rates to new half-century lows.
  • The Canadian dollar could weaken a bit further to below 80 cents in the first half of 2009 as commodity prices remain under pressure, but is expected to rebound above 85 cents later in the year.
  • The global economy may grow by just 1 per cent in 2009, marking the slowest year for global growth since the early 1980s.
  • We look for oil to average US$45/barrel in 2009.

A complete copy of the BMO Economics 2009 Outlook: A World of Challenges is available at: www.bmonesbittburns.com/Economics/


Paul Taylor, Chief Investment Officer, BMO Harris Private Banking

  • The sub-prime credit crisis of the fall of 2008 will continue to exert pressure on corporate balance sheets, both within and outside of the financial services industry.
  • Policymakers world-wide will remain vigilant in taking steps to reflate the global economy to stimulate consumers and investors to spend and invest rather than to hoard assets.
  • Stocks will rally meaningfully in advance of a turn in the economic outlook. Although the visibility on the duration of this down cycle is not high, an economic recovery is expected to be apparent by the latter part of 2009
  • The S&P/TSX earnings will fall year-over-year as the commodity sectors register double digit earnings growth declines. The Canadian dollar will struggle to firm against the US dollar and against other major currencies as long as commodity prices remain weak.
  • The first half of 2009 is expected to be very challenging for the capital markets. As a result we plan to only be a very selective buyer of Canadian equities early in the year. However, as economic growth re-ignites, there will be an opportunity for a rotation into more cyclical stocks and sectors.

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