Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Jean-Michele Gauthier continues to favour Canadian over U.S. stocks,
“[In September] rising yields drove a Value surge, led by Energy and Financials. Our model thus managed solid outperformance on its clear cyclical Value positioning (large OW [overweight] in Financials, Materials/Base Metals, and Energy) and its country allocation (OW EM ex-China/Canada/Europe, UW U.S.). Overall, global Defensives’ low Value and Growth combo makes them vulnerable to shifts in sentiment/Momentum. Canada over U.S. Our pro-Canada signal is high and stable. Canadian Energy inches back to preferred status, joining Discretionary, Financials, Technology, and Staples. Real Estate is fast losing its ranking advantage over U.S. peers. Meanwhile, the U.S. enjoys a clear lead on Materials, Healthcare, and Industrials. Overall, the Canada vs. U.S. question is akin to Value vs. Quality.”
“@SBarlow_ROB Scotiabank: Buy Canada over U.S.” – (research excerpt) Twitter
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BMO economist Robert Kavcic highlighted Toronto housing prices that are heading quickly back into the stratosphere after a brief breather,
“Toronto’s housing market is firming again after ‘cooling’ through the spring and summer. We use the word ‘cooling’ loosely because, while activity has backed off from astronomical levels, it is still historically strong by almost any metric. Sales were down 18% y/y in September, but that looks to be up month-over-month after seasonal adjustment and would stem five consecutive declines. The market balance also looks to be tightening again, while the benchmark price was up 19.1% y/y, accelerating from 17.4% y/y in the prior month. What now? We shouldn’t be lulled into thinking that outsized strength is all gone. If election campaign promises make their way through to policy, we could see a small net stimulative impact on demand (which we clearly don’t need)”
“@SBarlow_ROB BMO: Toronto housing prices up 19% YoY” – (research excerpt) Twitter
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Also from BMO, chief economist Doug Porter notes that the loonie is not tracking commodity prices higher as it usually does,
“With oil prices closing in on $80 and at their highest level in seven years, broad measures of Canadian commodity prices are on the march again. The spike in natgas prices above $6 has piled on. The BoC’s commodity price index is poised to push through the highs hit earlier this year, when lumber was reaching for the sky. This broad strength is good news for Canada’s balance of payments, and merchandise trade has already turned positive so far this year (versus a deficit of $37.5 billion last year). Still, the Canadian dollar is mostly unimpressed by the upswing in resource prices. True, the loonie has firmed from recent lows of around 78 cents ($1.28/US$) to 79.5 cents now (just under $1.26) . But it still looks a tad light stacked up against recent oil prices.”
I’ve written previously that over the past year, the Canadian dollar has been tracking copper rpices more closely than oil, and that continues to be the case.
“@SBarlow_ROB BMO: CAD not tracking energy price’ – (research excerpt) Twitter
" @SBarlow_ROB copper/CAD --> " – (chart) Twitter
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Diversion: “Why are newer, nice neighborhoods so hard to find?” – Marginal Revolution
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Scott Barlow