Slowing economy will stall stock market: economist

Three-month chart of the S&P/TSX composite index

With the economy moving toward stagflation, the key Toronto Stock Exchange index is not going to gain much more this year, according to a bank economist.

The slowing economy led CIBC World Markets chief economist Jeff Rubin to cut his year-end forecast for the S&P/TSX composite index to 14,300 from 15,200, he said Monday.

The index closed at 14,010 on Friday. The index has traded up to 15,155 and as low as 12,011 in the past year.

Rubin also cut his 2009 target for the TSX to 15,250 from 16,200.

The Bank of Montreal is calling for the TSX to hit 14,750 within three months and 15,750 in a year.

U.S. economy flat

Higher U.S. interest rates and gas prices and falling house prices "will deal a lethal blow to the hopes for a fast bounce-back in growth stateside," Rubin said in a release.

The U.S. will teeter between growth and recession "for a fair bit longer," slowing Canadian growth.

High energy prices bode well for producers, but airlines and autos are especially vulnerable, he said.

The oil-price rise to $140 US this year "has produced a cash bonanza for Canadian producers," and natural gas producers are also doing well.

With files from the Canadian Press

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