Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO Capital Markets analyst Ben Pham previewed earnings in the yield-heavy energy infrastructure sectors,
“Q3/24 earnings season kicks off on October 29 with GEI. We have made estimate changes to 60 per cent of our coverage and expect more in-line/misses than beats. Following our analysis of public data sources, proprietary models, and detailed discussions with our coverage, we point to notable potential Q3/24 beats from TRP and EMA and potential quarterly misses from ENB and Renewables broadly. We recommend positioning accordingly into Q3/24 results with further details herein … Sector performance. 1) Utilities. During Q3/24, the S&P/TSX Utilities Index performance of 16.5 per cent trumped the S&P/TSX Composite Index 10.5 per cent, though lagged the U.S. utilities (19.4 per cent). This marked the second consecutive quarter of relative strength since Q1/23, supported by declining 10-year bond yields/further rate cut expectations, fund flows (especially to large-cap utility names), and continued favorable fundamentals (rising rate base and dividend growth announcements) … Pipelines. During the third quarter of 2024, Canadian pipeline and midstream equities handily outperformed the S&P/TSX Composite (16.8 per cent vs. 10.5 per cent) and U.S. midstream peers (0.6 per cent). We believe the outperformance was due to the decline in interest rates supporting fund flows to the subgroup, strong quarterly results, and rising growth expectations”
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National Bank analyst Daren King detailed the latest results for the Teranet National Bank House Price Index,
“After almost a year in the doldrums, house prices in Canada’s major urban centers rose by 0.5 per cent for the second consecutive month, supported by more advantageous interest rates. Despite a significant rise in the number of new listings on the resale market, inventory has been stalling over the past four months due to a large number of sellers deciding to cancel their listings each month, thus limiting the deterioration in market conditions for the time being. However, we do not believe that this is the start of a significant upward trend in home prices across the country since, despite the continuing cycle of monetary policy easing, the resale market remains sluggish, showing no signs of significant recovery. Indeed, although interest rates have fallen, affordability conditions remain extremely difficult and the job market less buoyant, particularly for young people. With the Bank of Canada set to make further rate cuts in the coming months, and with the announcement of an increase in amortization from 25 to 30 years for insured mortgages to come in December, it’s likely that many buyers and sellers have decided to be patient and will sit on the sidelines in the months ahead”
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J.P. Morgan strategist Nikolaos Panigirtzoglou made two interesting observations (my emphasis),
“While traditionally rate markets were perceived to have been more successful than equity or credit markets in anticipating the macro picture, over the past two years the opposite has been true. Equity and credit investors got rewarded by focusing on the interest insensitivity and health of the corporate sector and by de-emphasizing the risk of deviating from a soft landing. In contrast, rate investors have been penalized underperforming cash over the past two years via overemphasizing recession risks and via favoring duration longs … Markets have now begun to price in the Trump trade … The rising probability of a Republican sweep is also seen in the market moves over the past two weeks with stronger US equities and in particularly US banks, a stronger dollar, tighter credit spreads and higher UST yields. That said, we do not believe that the probability of a Republican sweep embedded in markets at the moment is as high as the around 45 per cent (the probability in betting odds of Republicans retaining the House as all three are needed) currently implied by betting odds”
BofA Securities investment strategist Michael Hartnett added,
“Latest presidential election win probability … Trump 61 per cent vs Harris 49 per cent; more relevant to markets is election ‘sweep’ risk now 44 per cent (oddschecker.com) driven by GOP sweep probability surge from 20 per cent to 33 per cent; GOP sweep 2016 was sweet for stocks, oil, US$, sour for bonds, gold”
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Diversion: “The Case for Ozempic as a Addiction Treatment Keeps Getting Better” – Gizmodo