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In 2011, the worst year for equity investors since the 2008 global meltdown, the overall market fell by 11% while financials were down 7%. Bank stocks were largely flat.

Barclays Capital analyst John Aiken forecast an end to the double-digit profit growth that has powered the banks since the financial crisis. Yet less-bearish observers said risks from Europe’s debt crisis and other external threats make banks a wiser investment than more volatile energy and mining stocks. And traditional safe haven plays like telecoms and health care offer little upside after also outperforming the broader market in 2011. Instead of trying to mimic what worked in 2011, investors should look for companies in depressed sectors with good value, such as banks, said Barry Schwartz, a portfolio manager at Baskin Financial Services. “[Pipeline operator] Enbridge is not going to grow at 20% a year,” noted Mr. Schwartz. “However a bank stock could grow at 15% a year and they’re trading at 10 times earnings.” Canadian banks also offer hefty dividends, and did not cut them in the recent recession. Five of Canada’s six big lenders, including Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and CIBC have dividend yields of more than 4%. Market veterans said this offers some downside protection if global financial and economic turmoil worsens. “It’s a sign of confidence on the part of Canadian bank management that, regardless of the outlook, they felt that they were in sufficiently good shape to start raising dividends&nbsp; again,” said Gavin Graham, president at Graham Investment Strategy. Toronto stocks got off to a solid start in the first week of 2012, with the composite index rising almost 2% to close at 12,188.64. But gains are expected to be modest this year, with the index reaching just 12,500 by the end of 2012, according to a Reuters poll. Many think problems outside of Canada, especially Europe’s sovereign debt crisis, will impede global growth and demand for commodities. This would hurt more growth-sensitive sectors like mining and energy, which account for more than 40% of Toronto’s composite index. Last year, base metal and energy issues plunged 27% and 17% respectively, adding up to a miserable year for cyclicals after strong performances in 2009 and 2010. Most of the gain from commodities in those years was driven by double-digit growth in China, the world’s largest buyer of industrial metals. But Chinese growth slowed last year, igniting a downward spiral in base metal mining stocks. Despite recent signs that the Chinese economy has steadied and the U.S. economy is picking up steam, eurozone debt worries are expected to dominate in early 2012. Many also expect the gridlock in Congress to worsen as the U.S. presidential election approaches, hurting investor sentiment and compounding the difficulties for resource stocks. Still, analysts said investors should not shun commodity-linked stocks indefinitely. Some think they could rally firmly in late 2012 if concern over Europe eases and the global economy gets back onto strong footing. “To the extent that the market focuses on the U.S., more cyclical names, more consumer-oriented names and more pro-growth names make sense,” said Stephen Wood, chief North American investment strategist at Russell Investments in New York. “Getting overly defensive at very high valuations is not something people want to do.” © Thomson Reuters 2012 Posted in: Economy, Investing, News, Outlook 2012, Trading Desk&nbsp; Tags: Bank of Montreal, banking, Canadian banks, CIBC, dividends, financials, investing, Royal Bank of Canada, the Bank of Nova Scotia, TSX Reuters U.S. Fed officials signal more policy action may be neededGoodman &amp; Co. boosts stake in American ApparelHedge funds take on IMF over Greek debtNot time for 'risky' spending in budget: FlahertyCopper vulnerable to price spikes due to shorts More from Reuters » var npDsqSso = /^[\s\S]*\bdisqus-sso=([^;]+)[\s\S]*$/i.test(document.cookie), npDsq_remote_auth_s3 = 'e30= 4ce72f958bc936ef5001150fc4d4fcef9fc4e256 1326247574', npDsq_api_key = '4ArDk9sCU7Y27T6Ni9ixYD3n90ZSiXdMtCOI9mcHFCEf6gnVGHpnKgereuyCJ3Rn'; Glad you liked it. Would you like to share? Facebook Twitter Share No thanks Sharing this page … Thanks! Close What do you think?Opinions expressed in comments that appear on our site are expressly those of the comment writer and not the Financial Post. Offensive language, personal attacks and unsubstantiated allegations are not allowed and may result in your account being banned. Comments containing links are not permitted. Comment threads are closed after 48 hours. For more information, read our full Terms and Conditions. If you see a typo or error in this story, feel free to <

Canada’s labour market has hit a wall, with job declines in three of the past four months suggesting turmoil outside the country’s borders is denting the confidence of employers.

The slowdown comes as deepening global uncertainty is gnawing away at business confidence. Consumers, too, are growing cautious, with a report on gross domestic product earlier this week showing both spending and total domestic demand cooling in the third quarter.

Manufacturing employment tumbled to another record low last month, while in the finance and real estate industry, three-month average job losses are the steepest on record. Meantime, government hiring – a key source of employment in the past few years – is expected to weaken amid budget cuts.

Canadians need to start worrying about the worsening debt mess in Europe, and its ability to hit home hard

"Since June, the global retrenchment of risk associated with the European crisis has indeed resulted in a significant correction in the prices of equities and other risky assets, as well as a widening of credit spreads in Canada," the bank states.

pillover effects on the global economy touches almost every aspect of Canada's economic and financial system, from trade, to the financial system to consumer and business confidence

richest indirect government supports for business R&amp;D of any country in the world

what productivity-bosting initiatives the government should pursue.&nbsp; The choices consisted of: “Welcoming more foreign investment” (we have hardly been unwelcoming, and the surge in incoming FDI over the past decade, overwhelmingly focused on resources,&nbsp;has made our productivity worse, not better). “Diversifying our trade links” (being tied to the U.S. right now is a problem, no doubt, but our trade performance with all other countries is much worse, both quantitatively &amp; qualitatively). “Pursuing big infrastructure projects” (this is the only choice with a shred of genuine potential, although even the wording of this option makes is sound like a boondoggle). “Deregulating pre-internet industries, like telecommunications” (the bizarrely self-contradictory wording of this choice — telcommunications is a pre-internet industry??? — says it all!).

This is a fundamental link in the dubious logical chain of trickle-down economics: “create a business-friendly, deregulated environment, and business will respond with entrepreneurial energy &amp; efficiency.

Statistics Canada said the ratio increased as the expansion in credit debt surpassed growth in disposable income.

They've warned that Canadians who have become accustomed to taking advantage of relatively cheap money must tighten their belts in anticipation of the return of rising interest rates.

The central bank said last week that inflation pressures are benign, so it can keep its benchmark interest rate steady at one per cent as the global economy continues to struggle.

Canada’s real gross domestic product to slow to 2.2 percent in 2011 and 1.9 percent in 2012

big downside risk is the spillover effect of the European crisis on financial markets and global growth

its key interest rate sits at 1 percent – but noted there is scope for further monetary easing if the economy weakens

major oil companies are finally gaining access to Iraq’s petroleum reserves.

The companies seem to have calculated that it is worth their while to accept deals with limited profit opportunities now, in order to cash in on more lucrative development deals in the future, oil industry analysts say.

But last month many of those same companies — including Exxon Mobil and Occidental Petroleum, the first American companies to reach production agreements with Baghdad since the 2003 invasion

Following a notable decrease the previous month, employment edged down&nbsp;19,000&nbsp;in November, and the unemployment rate rose by&nbsp;0.1&nbsp;percentage points to&nbsp;7.4%. Despite the recent declines, employment was up&nbsp;1.2% (+212,000) from&nbsp;12&nbsp;months earlier.

A decline of&nbsp;53,000&nbsp;in part-time work was partially offset by an increase of&nbsp;35,000&nbsp;in full-time. Compared with a year earlier, the number of part-time workers was down&nbsp;1.9% (-62,000), while full-time employment grew by&nbsp;2.0% (+274,000).

Employment declined in Quebec and Saskatchewan in November, while it increased in Nova Scotia. There was little change in the other provinces.

The total amount of debt that Canadians hold in relation to their incomes continued to inch higher in the first quarter, Statistics Canada data revealed Monday.

The debt-to-income level ticked almost a full percentage point higher to 147.3 per cent in the January to March period, the agency said. The figure is a measure of total debt load — including mortgage and consumer debt — versus disposable income.

A decline in durable goods spending pushed consumer credit lower, but stable borrowing costs as well as higher housing resale and renovation activities pushed mortgage debt higher, the agency said.

The unemployment picture isn’t likely to get much better in 2012, experts say, especially for people without work experience. For the workforce as a whole, the jobless rate is 7 per cent, but for people between the ages of 15 and 24, the rate is twice as high, according to the Conference Board of Canada.

Part of the problem is cyclical weakness in the economy. But there are long-term structural issues as well, such as the fact the baby boom generation is taking longer than expected to retire.

In the short term, Canada’s labour market conditions are expected to remain uncertain, experts said.

Statistics Canada reported in December that mortgage debts in this country have crossed the $1-trillion threshold and consumer credit has risen to $448 billion.

A Canada Mortgage and Housing Corp. report released last month described the level of household debt as a "serious issue."

Canadians currently owe about $1.50 for every dollar they earn.

Deregulation is an act by which the government regulation of a particular industry is reduced or eliminated in order to create and foster a more efficient marketplace. Deregulation is usually enacted to weaken government influence and forge greater competition. By this token, deregulation also creates an economic environment favorable to upstart companies that were unable to enter the industry prior to the passing of deregulation. It is also widely held that deregulation often serves as a catalyst for increased innovation and mergers among weaker competitors. Deregulation is often driven by lobbyists and lobbying groups that represent various industries and business interests. Industries that have undergone deregulation include communications, banking, securities, transportation, as well as power and utility. Although deregulation might purge government influence all together, some government oversight usually remains.

Canadian households are drowning in debt. According to a new report released Tuesday, Canada's household debt has reached a record high in part to stagnant income and individuals taking on more debt.

Much of Canada’s consumer debt stems from stagnant income and those piling on debt. Debt burdens have exceeded the levels in the United States and the United Kingdom. Mortgage credit rose to $1 trillion, while consumer debt increased to $448 billion.

Furthermore, the report suggested that household net worth in the third quarter declined by 2.1 percent, which is the second straight decrease. Per capita household stands at $180,100, down from $184,700.

Despite that improvement and a reduction in consumer bankruptcies last year, overall debt continues to rise — though much more slowly than before.

As the economy slows and consumers become more nervous about the future, Canadians are curbing spending and paying down some debts.

But he said given that household debt-to-income levels sit at an historic 150 per cent — that means mortgage and other debts are 1.5 times a Canadian household's average income — it would be risky for borrowing to rise further.

The headline RBC PMI - a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector - posted 54.0 in December, up from 53.3 in November, and signalled a solid improvement in Canadian manufacturing business conditions.

Key findings from the December survey include: Strong increases in both new orders and production Job creation remains solid Rate of input price inflation slowest in 15-month series history

Canadian manufacturing firms raised production in December.

Reducing the amount of leverage financial institutions use will be more effective in averting future crises than banning some forms of trading, Canadian Finance Minister Jim Flaherty said on Monday.

He played down concern a surging Canadian dollar, which is nearly at par with the U.S. dollar, would make Canada's products less attractive in global markets because they would become more costly for foreigners.

Canada escaped the worst ravages of the financial crisis because of its more tightly regulated banking system.