Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities held their annual Canada Banks Day, which included meetings with management teams.
Analyst Ebrahim Poonawala published a summary of the results,
“Our meetings with bank management teams, housing market experts and macro economists during BofA’s 8th annual Canada Banks Day indicate the potential for a cyclical rebound in 2025. A rebounding economy creates potential for EPS upside for the banks driven by stronger revenue growth and lower credit costs relative to our forecast. But a stressed job market, U.S. hard-landing risk factors that could derail things. Despite the cautious optimism on the macro, stagnant private investment, weak productivity growth and emigration, all seen as headwinds. Upcoming federal elections have the potential to alleviate some of these concerns given changes to the regulatory backdrop that has served as wet blanket on business investments … We have noted the increasing attractiveness of the Canadian banks relative to their global peers. This was reflected in investor attendance at this year’s event with 30% U.S. based investors, 2 times year-over-year. Inbound calls from global financials investors rising based on our conversations. We have also observed a pick-up in interest among U.S. L/S multi-manager funds, implying potential for increased stock volatility”
BofA has “buy” ratings on Royal Bank of Canada and Canadian Imperial Bank of Commerce.
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The research team at RBC Capital Markets made 16 changes to their global top 30 stock ideas list, leaving five Canadian companies.
Amazon.com, American Homes 4 rent, Biogen Inc., Chubb Ltd., Element Fleet management Corp., Marks and Spencer Group PLC., Restaurant Brands International and S&P Global were removed. Added were American International Group., Cameco Corp., Gaming and Leisure Properties, Healthequity Inc., Interncontinental Exchange Inc., Pinterest Inc., Sarepta Therapeutics Inc and Zalando SE were added.
The list as it stands now is Alimentation Couche-Tard Inc., American International Group. Inc., Anheuser-Busch lnBev, Bank Of America Corp, Boston Scientific Corporation, Brambles Limited, Cameco Corporation, Canadian Natural Resources Limited, Constellation Software Inc., CrowdStrike Holdings Inc., Ferrari NV, First Solar Inc., Gaming and Leisure Properties, GFL Environmental Inc., HealthEquity Inc., HEICO Corporation, HubSpot Inc., Illumina Inc., International Exchanger Inc., London Stock Exchange Group PLC, PayPal Holdings Inc., PG&E Corp., Pinterest Inc., Sarepta Therapeutics Inc., Shell PLC, Siemens Aktiengesellschaft, TELUS Corporation, Veeva Systems Inc., Xylem Inc. and Zalando SE.
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BMO senior economist Robert Kavcic sees a fifty-fifty chance of a 50 basis point Bank of Canada cut in November,
“The Canadian economy continues to grind out sub-potential growth and, with inflation back at the 2% target, talk of more aggressive easing continue … year-over-year growth at a below-potential 1.5%, while the economy is also running with sub-2% annualized growth over the past three- and six[1]month periods. Importantly, the initial look at August shows that the economy was flat, which will leave Q3 growth on track to meet our sluggish 1.3% call. For the Bank of Canada, this is shaping up to be a significant undershoot … The near-term path for rates is decidedly lower, and this run of data will keep a 50 bp rate-cut in play for October … Beyond the traditional playbook, torrid population growth is a unique feature shaping this cycle. There’s fear out there that an abrupt slowdown in population growth will actually tip Canada into recession, but we’d urge otherwise. For one, incorrectly-calibrated inflows have immediately driven demand well in excess of our ability to match it with supply—think housing, transportation and services infrastructure”
“Fifty-Fifty on 50″ – BMO Economics
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Diversion: “The Jane’s Addiction onstage bust-up was nothing. Let me tell you some stories” – A Journal of Musical Things