The positive backdrop for cyclical resource stocks got some additional support when a majority of British voters chose in favour of leaving the European Union, said Martin Roberge, Canaccord Genuity's head of North American portfolio strategy.
Prior to the referendum, the sector drew strength from U.S. dollar depreciation and the fading likelihood of the U.S. Federal Reserve hiking policy rates.
The Brexit vote suggests the highly stimulative conditions will remain, which bodes well for corporate debt, commodities, and equities over the short and medium terms, Mr. Roberge said in a note.
"As such, we continue to believe that resource cyclical sectors will retain their market leadership," he wrote. "History shows that typical resource cycles have lasted on average 23 months and outperformed markets by 43 per cent. We are 5 months into the rally and resources are up 29 per cent versus the market."
The Canaccord report presents some short-term trading ideas for Canadian stocks poised to beat the market in the third quarter.
While the resource rally entered the quarter with some momentum, all resource groups except gold are still negative on the year to date, compared to the year prior.
"Assuming the rally in non-gold resource groups holds, annual momentum should turn positive for several energy groups and base metals later in Q3," Mr. Roberge said.
In this kind of resource-driven market, however, defensive sectors tend to underperform, he said.
"Among groups that have outperformed the market over the past year, we believe Canadian food retailers, telecoms and utilities are the most vulnerable to tactically lag the market in Q3."
The firm undertook the same exercise at the start of the second quarter, presenting the following Canadian stocks as short-term trading ideas:
All but the last two trades "worked," the report said. Meanwhile, Canaccord maintained Bankers Petroleum and Pure Multi-Family REIT as active short-term trade ideas, to which the following names were added: