Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi foreign exchange strategist Daniel Tobon makes a bullish position on the loonie a “core trade” based on central bank policy rates relative to the Federal Reserve,
“This week in G10 features a number of central bank meetings and inflation prints, as well as FOMC Minutes. We like holding our core trades -- short USDCAD, short USDJPY, long NOKSEK, and short CHFJPY -- into these event risks … On the BoC, strong activity data and wage growth in Canada is likely enough to keep the BoC from a dovish pivot. Citi’s positioning data suggests leveraged investors are short CAD, which creates an attractive risk/reward for short USDCAD if BoC maintains neutral messaging, especially as markets price a more dovish path for the BoC vis-a-vis the Fed”
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BMO chief investment strategist Brian Belski recapped first quarter performance for his North American Dividend Growth Portfolio. Note that the benchmark for the portfolio is 60-per-cent S&P 500 Dividend Aristocrats and 40-per-cent S&P/TSX Dividend Aristocrats,
" Annualized 5-yr = Outperform by 0.9%; Since Live Portfolio Inception = Outperform by 1.8% annualized. Energy was an area of weakness in the quarter as our preferred yield names, TC Energy and Enbridge underperformed the overall sector. Stock selection within Technology hurt performance, as Apple and Cisco delivered negative returns in Q1. Our stock selection within Health Care detracted from performance as Amgen, Gilead and UnitedHealth were all down in the quarter. Our security selection decisions within Consumer Staples contributed to performance, particularly Target which was up 24%. Weighted Average Dividend Yield 3.7 … We continue to advise investors to not be too concerned should the market encounter some weakness in the coming months, as we expect, and instead treat any such periods as an opportunity to increase exposure to favored positions within portfolios”
The top five holdings in the portfolio are Enbridge Inc., Bank of America Corp., Royal Bank of Canadan, Toronto-Dominion Bank and TC Energy Corp.
The best performers during the first quarter were Target Corp., Merck & Co., Waste Management Inc., JP Morgan Chase & Co. and Manulife Financial Corp. The worst performers were BCE Inc., Apple Inc., Gilead Sciences, Telus Corp and UnitedHealth Group Inc.
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Scotiabank’s quantitative strategy team surveyed their institutional clients,
“Our latest survey shows that institutional investors have been broadly adding to their Equity exposure in Q1, as they feel more comfortable about the economic and earnings outlook. 42% of respondents indicated feeling more confident about the macro outlook vs only 11% feeling less confident. Still, it seems that investors are not taking undue risk at this time as 75% indicated their risk-appetite remains ‘average’ … Our poll shows that 67% of institutional investors believe Trump will be elected President (again) in November. Trump is also viewed as the ‘most friendly’ to the US equity market by 41% of investors (vs 22% for Biden) … For the first time in a year, both Energy (#1) and Materials (#3) are making the top three list of the most likely outperformers. Both gained 5 ranks relative to our January survey. Financials (#2) is rounding out the top-three. Among the least likely outperformers are Real estate, Discretionary, Staples, and HC [health care] … Investors continue to believe Fed rate cuts will drive the dollar down, and commodities up. Both gold and oil are seen trading at higher levels in the next 12-M. The backdrop is viewed as conducive for the Canadian dollar”
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Diversion: “Canadian DNA lab knew its paternity tests identified the wrong dads, but it kept selling them” – CBC
Scott Barlow