Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Earlier this week, BofA Securities U.S. equity and quant strategist Savita Subramanian dampened investor enthusiasm for the immediate and longer term,
“Since 1936, 5% or greater declines in the S&P 500 index have occurred three times per year on average, 10%+ corrections have occurred once per year on average. We are thus overdue for a pullback. We also find ourselves heading into August and September, a period accompanied by seasonally weak S&P 500 returns. With the US election in November, we note that prior presidential election years have seen the VIX increase by about 25% from July to November … Easy index gains may be in. From a thematic perspective, AI capex takers of 2023 are now capex spenders, and the monetization of AI may take longer than anticipated- earnings reactions over the last few weeks underscore this shift … Dividends contributed ~40% to S&P 500 total returns from 1936 to 2010, but since 2010 have contributed just 15%. After lagging EPS growth for the last decade, dividend growth is catching up, bolstered by two banner mega cap growth stocks initiating dividends recently. In the early 2010s, depressed valuations indicated double-digit price returns for the next decade. Today a higher multiple points to low single-digit price returns through 2034. Dividends are slated to make up a larger proportion of returns”
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Jefferies analyst Anthony Linton previewed earnings for Canadian midstream companies,
“We’re out with our 2Q preview for Canadian Midstream where we expect demand to remain strong as producers look to establish partnerships with operators to secure capacity for growth objectives. With key catalysts already announced over the last few months we think investor’s focus will shift to execution. Capital allocation will be prioritized this quarter, including FCF generation, debt reduction and shareholder returns. We highlight KEY CN as a standout here. Capital recycling will also be a key theme for the group including ALA CN’s process for the sale of its equity stake in MVP. We continue to remain bullish on ALA CN, BIP, KEY CN and PPL CN as we take our price targets higher for each”
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Scotiabank analyst Jason Bouvier assessed the risk of wildfires to Alberta oil production,
“There are 117 wildfires burning in Alberta, with 23 being out of control. Of those, there are 2 fires that are close to major oil sands assets. To-date, there has been minimal impact on oil sands production … Fires closest to major assets. In our view there are 2 key fires. One that is about 11 km away from IMO’s Kearl (also 18 km from SU’s Firebag and 22 km from Sunrise) as well as one 4 km north of MEG’s Christina Lake. These fires are considered out of control and the fire near Kearl has increased to >100,000 hectares while the largest fire near Christina Lake is ~1,400 hectares. Note that the wildfire near Kearl has largely spread to the east, away from Kearl. Further, rain during the week of July 22nd helped suppress fires in Northern Alberta. Biggest risk is around Fort McMurray. The biggest risk is arguably not major asset damage, but rather fires close to Fort McMurray. Right now, we believe the risk is low because there are no out of control fires near Fort McMurray, but if the fires cause an evacuation, this can have a material impact on production levels”
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Diversion: “When India’s vulture population collapsed, half a million human deaths followed: study” – CBC