Investor panic over the global financial crisis could send the S&P/TSX to 9,500 this year, but market fundamentals don’t justify the selloff and will likely spur a major rebound in 2009, says a new CIBC World Markets report.

“Investors should not lose sight of the fact that many of yesterday’s fundamentals have not changed,” wrote Jeff Rubin, CIBC World Markets chief economist and chief strategist, in his latest Canadian Portfolio Strategy Outlook Report.

While it’s clear that the United States and most OECD countries have entered a recession, he said the downturn isn’t deep enough to warrant the massive erosion in energy and resource stock valuations.

Global growth is not as weak as the financial crisis suggests, according to Rubin. He does not expect global growth to fall below 3.5% this year or next.

“While that’s a big step down from the growth of the last several years, it is still a far cry from the growth rates that historically have been associated with a sustained bear market in global commodities,” he said. “And for that matter, commodity prices have yet to fall anywhere close to levels that in the past have been associated with bear markets.”

Given that demand for oil and other resources remains strong from the still-healthy BRIC (Brazil, Russia, India, and China) countries, which have been the “mainstay of recent global economic growth,” Rubin said he expects the price of oil to return to at least its level prior to the downturn, if not higher. He forecasts oil prices will average US$150 a barrel over the second half of next year on even a modest recovery in global economic growth.

In the meantime, though, he expects investors to continue de-leveraging, which could push the S&P/TSX to 9,500 points by the end of the year.

“It almost seems that the more the Federal Reserve Board and other central banks around the world pull new tricks out of their hats, the more investors run for cover,” he said. “This is likely to continue until a bottom in U.S. housing prices in the first half of the coming year.”

For 2009, Rubin reduced his TSX target from 14,000 to 12,000, but said he still expects an energy-led rebound during the year. “A year-end target of 12,000 represented an almost 30% upside for stocks over the course of 2009. That’s sufficiently attractive to warrant a market weight in equities, despite the prospect of near-term volatility in the index in coming months,” he wrote.

For the near-term, Rubin recommends a defensive strategy with extra weighting to consumer staples and utilities.