Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief investment strategist Brian Belski took a bit of a victory lap as his “Buy Canada” trade idea worked out in the third quarter,
“the TSX gained 9.7% in the third quarter, outpacing the S&P 500 by over 4%, marking the strongest outperformance for Canada since the first quarter of 2022. Indeed, all sectors posted positive returns during the quarter and half the sectors in Canada posted double digit gains, led by the more interest rate sensitive areas like Real Estate, Financials and Utilities. While there has certainly been a yield focus to the recent rally, which does benefit Canada, this rally has been a generalized ‘Buy Canada’ trade that is exhibiting improvement in overall equity market flows; a trend we expect to persist well into 2025. Overall, this positive broad-based, low dispersion rally among TSX sectors is a positive sign that the market is beginning to see improving breadth and confidence in the fundamental backdrop of Canadian equities. As such, as valuations normalize faster than expected, we believe the market will likely pass our current 24,500 year-end price target sooner, rather than later”
Mr. Belski’s Consistent Growth stock list, emphasizing companies with low earnings volatility and improving profit margins, has been outperforming. The stocks in this list are Barrick Gold Corp., Alamos Gold Inc., AtkinsRéalis Group Inc., Colliers International Group Inc., Celestica Inc., Element Fleet Management Corp., Granite REIT, goeasy Ltd., Great-West Lifeco Inc., iA Financial Corp. Inc., Intact Financial Corp., Killam Apartment REIT, Loblaw Cos. Ltd., Linamar Corp., New Gold Inc., Premium Brands Holdings Corp., Sienna Senior Living Inc, Transcontinental Inc., Trisura Group Ltd. and TMX Group Ltd.
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Scotiabank strategist Jean-Michel Gauthier’s quant-driven models have moved to an underweight position in energy despite geopolitical risks,
“Interest rate sensitive sectors and cyclicals (Discretionary, Industrials, Financials ex-US) led in September as the market kept hitting new highs. Real Estate, Utilities, and Telcos definitely enjoyed Fed rate cuts tailwinds, with Momentum rising. The model has thus shifted its positioning to small OW in these sectors, along with Financials and Industrials, funded by a new large UW in Energy as well as existing UW in US Discretionary, and Technology. The Cyclical over Defensive bias is thus closing fast after a June high point. We continue to favour a GARP approach to offset slowing earnings in expensive sectors …The pro-Canada bias increases a tad, mostly on falling US attractiveness in Discretionary/Technology. Canadian Gold miners (Materials), Financials, Real Estate, and Energy outrank their US peers. Canada looks great on Value, while the US dominates on Quality”
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RBC head of global commodity strategy described the political tensions in Iran and Israel,
“President Biden today noted that the White House was “discussing” support for Israeli strikes on oil facilities. With Israel vowing to respond to Iran’s ballistic missile barrage on Tuesday, the Netanyahu government has demonstrated a heightened risk tolerance and willingness to engage in escalatory actions to achieve their strategic objectives in recent weeks. US intelligence has previously highlighted the risk to the Kharg Island oil export facilities, which function as a central nervous system for Iran’s oil sector and handle around 90% of the country’s 1.7 mb/d of crude exports … Iran and its proxies could target energy operations in other parts of the region to internationalize the cost if the current crisis devolves into an all -out war. Washington will invariably make a call to Riyadh in the event of a material supply disruption or run -up in prices”
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Diversion: “An Alarming New Trend in Hurricane Deaths” – The Atlantic