Moderate growth and low interest rates to likely benefit equity markets despite economic slowdown Record high US trade deficit fears unwarranted, according to CIBC World Markets TORONTO, Sept. 3 /PRNewswire-FirstCall/ -- The move to a slower pace of growth in the US and a resulting cooling in Canadian growth ahead will not equate to overly negative news for shareholders, according to CIBC World Markets' Monthly Indicators Report for September. "Equity markets this year went from worrying about too much economic growth and sharply rising interest rates, to fretting about too little growth and an earnings slowdown," says CIBC senior economist Avery Shenfeld. "Instead, while the North American economy won't look as happy as in a boom, the combination of moderate growth and still-tame interest rates could bring some smiles to shareholders in the quarters ahead." According to Shenfeld, the impact of the slowing US economy, and similar expectation for the Canadian economy, will result in a drop in TSX operating earnings from this year's "stellar" 28% gains to more modest 10% growth in the coming year. But equity valuations will be supported by healthy dividend increases and a favourable comparison with still-low bond yields. The September Monthly Indicators Report also features an article by senior economist Benjamin Tal on the impact of the US trade deficit in which he explains the anxiety created by the United States' June trade shortfall - standing at a record high of $55.8 billion - is grossly over-rated. Tal says that the US dollar is not at risk of a large, sudden depreciation over the coming year. "The truth is that the dollar is special," says Tal. "The greenback is the reserve currency of choice. Globalization, financial deregulation and technological progress are reducing the home bias factor (the tendency of investors to prefer their own country) - resulting in continued demand for the dollar." Tal also dismisses concerns that foreign central banks could sell their US Treasuries and thereby put upward pressure on American interest rates, noting that while they are major holders of Washington's debt, they account for only 4% of the total US credit market. "Eventually the US current account deficit will have to shrink, setting the stage for the second leg of dollar depreciation. But that 'eventually' is not now, nor any time soon. If your investment time horizon is 12-18 months, don't bet on a major dollar slump," says Tal. CIBC World Markets' Monthly Indicators Report is available at http://www.cibcwm.com/research. CIBC World Markets is a full service corporate and investment bank throughout North America, with operations in Asia, Europe and Australia, and serving more than 8,000 corporate, government and institutional clients. CIBC World Markets' parent company is CIBC, one of North America's first and largest financial institutions with offices in 18 countries, including the world's major financial centers. A publicly traded financial services company, CIBC has assets of US$210.1 billion and a market capitalization of almost US$16.2 billion. DATASOURCE: CIBC World Markets CONTACT: Benjamin Tal, Senior Economist, CIBC World Markets at (416) 956-3698, ; Avery Shenfeld, Senior Economist at (416) 954-7356, ; or Rod Cumming, Senior Manager, Marketing and Communications, CIBC World Markets at (416) 594-7774 or

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