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Scotiabank’s research team is arguing that Canadian consumers are far more resilient than the consensus believes, and this sets up a significant number of promising TSX investment opportunities.

Rodrigo Echagaray, Meny Grauman, George Doumet, Hugo Ste-Marie and Jean-Michel Gauthier published an in-depth report Wednesday outlining why pent-up demand, immigration, wage growth and a strong labour market will keep household consumption close to current levels. Population growth, running at four times the historical pace, will be particularly helpful.

The analysts grant that higher inflation and mortgage renewals at higher rates will hurt consumer spending - but there’s a limit. Scotiabank forecasts spending to rise 2.2 per cent in 2023, close to consensus estimates, but expects 1.4 per cent growth next year - double the consensus view.

Financial services analyst Meny Grauman believes Canadian banks are roughly fairly valued at present, and favours TD Bank and Bank of Montreal for their defensive characteristics. Assuming an economic soft landing lies ahead, he also sees considerable upside in Canadian Imperial Bank of Commerce because of its current low valuation levels (it trades at only one times book value.)

The analysts also see opportunities in the consumer products sector, and for similar reasons. Stocks like Canadian Tire Corp. and Gildan Activewear Inc. are trading with valuations comparable with the lows of the 2008 financial crisis. Any good news on consumer resilience would provide a tailwind. Scotiabank also expects Dollarama Inc. to perform well as more struggling consumers look for bargains.

Out-of-consensus forecasts get attention and Scotiabank analysts, economists and strategists did an excellent job stating their argument with painstaking detail in the research report. Investors should remember that most analysts disagree with them, at least for now. The report makes monthly retail sales figures even more important to follow – the longer they stay strong, the more compelling Scotiabank’s predictions will become.

-- Scott Barlow, Globe and Mail market strategist

Also see Scott Barlow’s Noteworthy: REITs with a ‘below average’ chance of maintaining payouts are worth attention

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Stocks to ponder

Kinross Gold Corp. (K-T) Month-to-date, the share price has rallied 20 per cent, making it the second best performing stock in the S&P/TSX Composite Index. The dividend-paying gold producer is overbought on a short-term technical basis, but analysts still see considerable upside over the next year. Jennifer Dowty delves into the investment case.

The Rundown

Lululemon’s U.S. triumph is a bad omen for Canadian equity markets

Vancouver’s Lululemon Athletica Inc. (LULU-Q) has risen so far, so fast that it has now joined the S&P 500 Index of the biggest, most-valuable blue-chip American companies. But as David Milstead tells us, Lululemon’s TSX-eschewing path is bad news for the country’s equity markets and the TSX itself.

Bitcoin soars to near 18-month high as ETF speculation mounts

The cryptocurrency is on a tear on mounting speculation that an exchange-traded bitcoin fund is imminent, as Reuters reports.

Others (for subscribers)

Number Cruncher: Seeking undervalued lenders on the TSX

Number Cruncher: 15 top-rated equity and fixed-income ETFs

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Odds of rate cuts next year rise: How markets and economists are reacting to today’s BoC outlook

Globe Advisor

High demand for U.S. blue-chip stocks leads to more CDRs – but how do they fit in portfolios?

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Ask Globe Investor

Question: I am considering transferring my mutual funds to ETFs that are held within my RRSP as they have a lower MER. I am using the TD Easy Trade app, which has no trading fees (first 50 are free).

My question is when would be a good time to cash these out? As they are going up, going down, or does it matter? Should I even be concerned about the timing? I have mutual funds with Manulife and AGF. The AGF ones are through an adviser that does not charge me, but I know they do get a cut through MER fees. The Manulife ones are self-directed. Through the TD Easy Trade app one can only buy TD ETFs which is a bit limiting, but I am okay with an equity index ETF if the MERs are lower by a lot.

If there are any questions you think I should consider I would appreciate it. - Myles D.

Answer: Since all this is happening within your RRSP, there are no tax consequences to consider. But you should investigate the potential performance consequences before you act.

It’s easy to get hung up on MER differentials. But that’s only a small part of the story. You’re planning to swap funds from AGF and Manulife for TD ETFs. The question you need to ask is how well will the new funds perform compared to the ones you’re selling. Of course, no one can foresee the future, but look at the past history of all the funds involved. The performance numbers are net of fees, so you’re comparing apples with apples. See if those you’re considering buying have better track records than those you own now. If yes, then go ahead. If no, perhaps a rethink is in order.

--Gordon Pape (Send questions to and write Globe Question on the subject line.)

What’s up in the days ahead

Philip MacKellar of the Contra Guys provides a lesson on avoiding value traps.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

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