Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
I’m hoping that RB Advisors report arguing that U.S. elections are mostly irrelevant to financial markets is true,
“Some of the historical returns are quite opposite to electioneering hyperboles. For example, who would have guessed that Energy would be the best performing sector during the Biden administration or that Emerging Markets would outperform US small stocks during the Trump administration? … There’s nothing inherently wrong with debt. However, the US has a significant asset/liability mismatch, i.e., long-term debt has been used to finance spending and tax cuts that have had limited long-term benefits or whose benefits have ‘leaked’ abroad … Some are currently concerned about the potential for the US to “inflate away the debt” as though lowering Debt/GDP by increasing inflation would be a new and suspect strategy. However, Debt/GDP fell during the three Presidents immediately prior to 1980 (LBJ, Nixon/Ford, and Carter) largely because inflation spurred nominal GDP growth … Whereas today’s common political refrain is a day of debt reckoning is coming, the reality is that day occurred 13 years ago, and the US economy has been insidiously penalized ever since”
“Fade the Election Part 2: Debt & Deficits” – RB Advisors
See also – “Market Factors: The U.S. dollar is still a safe haven. Probably” – Investment Ideas
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Long-term debt should have been more productively used to finance long-term assets, such as infrastructure, which the country now woefully needs.
BMO chief economist Doug Porter highlights the loonie near 20 year lows,
“The Canadian dollar firmed ever so slightly on Wednesday, but continues to flirt with four-year lows. The bigger picture is that at just under 72 cents (or just above $1.39/US$) it’s close to the weakest level in the past 20 years. The only other episodes when the currency was notably weaker were during the depths of the COVID disruption in 2020 and at the tail end of the oil price collapse in early 2016. A broad firming of the US$ is playing a role. But so, too, is the very aggressive policy of the Bank of Canada. With 125 bps of rate cuts under its belt already, and more to come apparently, the BoC is leading the central bank pack on the rate-cut front. It’s not helping that the Governor continues to suggest that the short-term interest rate spread—now wider than 100 bps—is not even close to its limit. Yet, in fact, the current gap on, say, 3-month paper is the widest since 1997, and aside from that episode we have never seen Canadian rates this far below their U.S. counterparts. Add in some possible market reaction after the U.S. election, and the currency could be under pressure for some weeks yet”
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Desjardins analyst Kyle Stanley published a quarterly report on national rent growth,
“Rental dynamics by geography. National effective rent growth (average of core markets tracked) in 3Q24 was 2.8% yoy (0.1% qoq). The pace of market rent growth decelerated further in 3Q as a confluence of factors, including a tough prior-year comp (8.4% yoy in 3Q23), heightened competitive pressures and stretched affordability weighed on market fundamentals. Rent growth as measured by CoStar continues to be most robust in Edmonton (6.4% yoy, 0.1% qoq), while growth per Rentals.ca was best in Halifax (11.6% yoy, 4.6% qoq). On a sequential basis, national market rent growth slowed by 1.5% during the quarter, which was the first quarter of less negative momentum in the last six. National market occupancy declined 60bps yoy and 20bps qoq to 97.9%. From a market-specific perspective, occupancy in Calgary and Edmonton decreased most significantly (-150bps and -60bps sequentially), while occupancy in Toronto and Vancouver was largely unchanged. Rent growth was strongest in KMP’s portfolio. Given its ~30% exposure to Halifax, the standout market on rent growth in 3Q24, KMP overtook BEI as the REIT with the best estimated market rent growth during the quarter at 6.2% yoy (4.7% yoy for BEI). Market rent growth for the Ontario-centric peers was fairly consistent, ranging from 2.5–3.0% yoy”
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Diversion: “Five frightening financial charts for Hallowe’en” – FT Alphaville (free with registration here)