TORONTO (Reuters) - CIBC World Markets cut its growth targets for Toronto's benchmark stock index for this year and for 2009 on Monday, citing an "increasingly stagflationary" environment, particularly in the U.S.
Jeff Rubin, chief economist and chief strategist at CIBC World Markets, lowered his year-end forecast for Toronto's S&P/TSX composite index <.GSPTSE> by about six percent to 14,300 from 15,200. He cut his 2009 target, also by nearly six percent, to 15,250 from 16,200.
The benchmark index hit a record high of 15,154.77 in early June.
The report said a slowing economy, energy cost-driven inflation and higher interest rates will hit "large swaths of the market" through 2009, with the airline and auto sectors suffering the biggest blows.
As well, rising interest rates in the U.S., along with the soaring cost of gas and sliding house prices, will dim hopes for a quick economic recovery in the United States.
"The U.S. economy will continue to walk the fine line between growth and recession for a fair bit longer," he said. "That will, in turn, take a toll north of the border" in Canada.
Rubin cut back his portfolio's equity weighting by four percentage points and revised its energy weighting up by a half-percentage point, with the benchmark crude oil price target at an average of $150 per barrel in 2009 and $200 in 2010.
He added half a percentage point of portfolio weight to the agricultural chemical subsector of the materials sector, citing soaring demand for higher protein diets in China and India, which is lifting agricultural prices around the world.
The materials sector now represents 23.1 percent of the portfolio.
CIBC cut its weighting in both consumer discretionaries and in industrials, both by half-percentage points, citing vulnerability to a U.S. economic slowdown. The United States is Canada's biggest trading partner.
The forecast comes less than a month after the brokerage predicted the TSX would hit a record high of 15,200 by year-end on the strength of sustained high prices for crude oil.
($1=$1.02 Canadian)
(Reporting by Jennifer Kwan; Editing by Bernadette Baum)
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