Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC analyst Mark Jarvi met management for Canadian utilities at a recent conference,
“AQN Still A Show-me Story: While we still believe AQN’s EPS will trough in 2025, the precision on that estimate is challenging given the lack of more concrete details/guidance from the company … Overall, the market may not accord AQN the benefit of the doubt on hitting that growth and will likely treat AQN as a show-me story until there is better execution. EMA Turning The Corner: Our conversation with EMA built on our incrementally more positive read on the Q3 results and update last week (Storm Before The Calm?). We don’t believe the storm recovery costs in Florida will have mean material reset on the balance sheet improvements and we see potential for S&P to switch from a Negative outlook to Stable in early 2025 (maybe sooner if there is a positive outcome on the Tampa Electric rate case) … while there are still items to manage, we believe EMA is on a better path forward and could see its valuation gap to FTS narrow over time. FTS Offers Consistency With Some Upside … Overall, FTS is well on track to deliver on its plan and consistent dividend growth, in our view … H Offers Cleanest Outlook: As expected, there were no surprises from our discussions with H’s management; it has a clear strategy with minimal noise … H remains a high-quality story and investors will have to decide whether they are willing to pay for the stability and growth upside”
Mr. Jarvi has “outperformer” ratings on Brookfield Renewable Partners, Transalta Corp., Atco Ltd, Boralex Inc. and Northland Power Inc.
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BMO chief economist Doug Porter details the ‘staggering’ divergence in Canadian and U.S. yields,
“The latest on-consensus U.S. CPI did little to halt the upward march in long-term bond yields. The 10-year Treasury is again flirting with post-election (and four-month) highs of around 4.45%. That’s up more than 80 bps from the lows of less than two months ago. The sustained upswing has certainly pulled Canada along… to some degree. But what’s truly notable in the past six weeks is not the back-up in GoC yields (at more than 40 bps), but the clear separation between the U.S. and Canada. For the past 20 years, the correlation between Treasuries and GoC yields has been 0.95 or higher—but the divergence since early October has been staggering (since roughly the point at which the tide seemed to turn in the election). The concerns over upside risk for U.S. inflation and budget deficits just don’t translate into Canada, where the concern is now over the potential hit to growth from trade uncertainty. While we suspect many of these concerns may be a bit overdone, the yawning and record gap in long-term yields could continue for some time yet until there is more policy clarity”
Relative yields are one of two primary rivers of the loonie along with crude prices.
“Something’s going to break” – (chart, excerpt) Bluesky
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Wells Fargo strategist Scott Wren believes U.S. markets will continue to lead the world,
“Our current ratings favor US. large-cap stocks over domestic small caps (as tracked by the small-cap Russell 2000 Index). But our guidance is flexible enough to look for opportunities as they arise. Note that we are not carrying an unfavorable rating on small caps; we are neutral, which translates to a full strategic weighting and looking for a chance to broaden our US. equity exposure Initially, as next year unfolds, we think the global economy will begin a modest recovery, but we also anticipate that the U.S. will be at the leading edge of that recovery. In our view, the U.S. has comparatively more fiscal stimulus, stronger consumer spending, and a vibrant technology sector, and the dollar is likely to appreciate against the world’ s mam currencies. It’ll be a tough combination for international markets to beat. Looking into 2025, we expect our US. equity exposure to broaden, but now is still a time to favor US. large-cap equities. Stay patient. Stay tuned”
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Diversion: “Americans Are Using the Dumbest Possible Passwords (2024 Edition)” – Gizmodo