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Investment Ideas How tariffs could raise inflation, a new REIT to watch, and which cannabis stocks a fund manager is buying

Did the global economy dodge an economic bullet this week? The U.S. and the European Union agreed to step back from the brink of imposing mutually punishing tariffs. The agreement - if there really is one - contemplates a future agreement to resolve trade differences.

Like Brexit, this is an unformed plan to somehow resolve thorny differences at an undetermined date in the future. Omitted from the plan to make a plan is any clue as to ending the most potentially harmful tariffs, those on steel and aluminum.

For a long time, I have been in the low-inflation-for-longer camp. Changing facts, including new tariffs and an escalation of the easily winnable trade war, have caused me to rethink that position. Barring a major shift away from the Trump administration’s trade policies, higher prices in lots of things are increasingly likely in the near future.

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-- Read more of Barry Ritholtz’s view here.

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Stocks to ponder

Minto Apartment Real Estate Investment Trust (MI.UN-T). This is a newly listed real estate investment trust (REIT). Real estate securities in the apartment segment have been strong performers. For instance, year-to-date, the unit price of CAPREIT (CAR.UN-T) is up 15 per cent, and the unit price of InterRent REIT (IIP.UN-T) has rallied 18 per cent. Apartment REITs have outperformed the S&P/TSX real estate sector, which is up 4.5 per cent, and the S&P/TSX composite index that is only up 1 per cent. While rising interest rates are a potential headwind for REITs, right now, the market is suggesting that there is only a 20 per cent probability that the Bank of Canada will raise interest rates in September. Ottawa-based Minto Apartment REIT owns a portfolio of 22 rental properties with a total of 4,279 apartment units that were purchased from real estate developer and manager, Minto Properties Inc. (MPI). Jennifer Dowty reports (for subscribers).

First Capital Realty Inc. (FCR-T). First Capital is one of the least volatile stocks Scott Barlow has seen in the domestic market, but the price has been sensitive to RSI buy and sell signals in the past two years. First Capital was deeply oversold in November 2016 and a 10.1 per cent rally followed immediately. It was also oversold at the end of June 2017 and rallied 5.6 per cent in the month afterwards. The price again represented significantly oversold levels in February of this year, and an 11.3 per cent rally occurred to recent May highs. Based on technicals alone (investors should always complete fundamental research before making any transactions) a price rebound for First Capital is a reasonable expectation in the weeks ahead, although the gains may not be huge given the general lack of volatility in the price over the past 24 months. Scott Barlow reports (for subscribers).

The Rundown

What a $700-million fund manager is buying and selling in the Canadian cannabis sector

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Marijuana stocks are volatile and many have sky-high valuations. While that is scaring away some investors, others, such as Charles Taerk of Faircourt Asset Management Inc., are sorting through cannabis companies and picking the players they think will perform best. The Globe and Mail recently spoke with Mr. Taerk about the companies he’s been buying and selling. Brenda Bouw reports (for subscribers).

This TSX sector is doing just as well as energy this year - but many investors aren’t noticing

While oil prices have received most of the credit for the recent comeback in Canadian stocks, the lesser-watched industrials sector has quietly been on a tear as well. Since the S&P/TSX Composite Index turned the corner in early February, industrial stocks as a group are up by 17 per cent and hit a record high Wednesday, led by the performance of the railways and supported by a broader cast of transportation, construction, industrial-equipment and industrial-services companies. That equals the gains of the Canadian market’s energy sector. Tim Shufelt reports (for subscribers).

Stock-market boom shows trade war becoming background noise

What trade angst? U.S. stocks are at five-month highs, Australian stocks at decade highs, and equity markets including Canada and India are at or near their highest levels on record. It’s a rally that gives the lie to all the talk that a looming trade war is about to send the global economy into a downturn. Rather, it underscores how the combination of continued central bank largess, a stronger-than-expected start to the company earnings season and growing indifference to the protectionist rhetoric emanating from Washington and Beijing are buoying risk appetite. The MSCI global index of stocks is up 2.8 per cent in July, on course for its best month since January. From Bloomberg News.

Top Links (for subscribers)

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‘Pensions risk could make schmucks of savers’

Others (for subscribers)

Friday’s analyst upgrades and downgrades

Friday’s small-cap stocks to watch

Others (for everyone)

Meet the DOCKS – the FAANGs of the TSX

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Number Crunchers (for subscribers)

Seven stocks with sustainable dividends in the fickle world of fashion

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What’s up in the days ahead

Recent trends in the online brokerage business suggest that it’s time to add the treatment of cash-type investments to the list of things investors pay attention to when comparing brokers. But at two firms, RBC Direct Investing and TD Direct Investing, the choice of products for holding cash has been limited in a way that serves the best interest of the firm over clients. Rob Carrick will explain.

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Compiled by Gillian Livingston

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