Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

A Wednesday research report from Citi analyst Maximilian Layton underscores a growing trend towards bullishness on copper prices and energy stocks. This is, of course, great news for the resource-heavy S&P/TSX Composite Index and domestic investors.

The title of Mr. Layton’s report effectively summarizes his optimism – “Why copper to $8,000/t isn’t far-fetched and evidence that crude and metals are the place to be for the ‘reflation trade’.” The current copper price of US$6,688 per tonne implies almost 20 per cent upside for the commodity price, based on his forecast.

The reflation trade refers to recent economic data showing a stronger-then-expected recovery in global manufacturing activity, and a subsequent increase in demand for raw materials. In copper, for example, the analyst expects global demand to exceed supply next year.

Story continues below advertisement

Mr. Layton’s colleague at Citi, U.S. equity strategist Tobias Levkovich, also recommended select materials sectors in a Monday report. ”We would think that autos [get] a significant pop, and that should coincide with demand for aluminum, steel, paints … housing also remains robust, filtering into strength for home appliances, lumber, floor coverings, and so on,” he said.

Domestically, Scotiabank strategist Hugo Ste-Marie’s monthly update on top performing market sectors noted that materials stocks gained price momentum and saw increased profit growth potential during second-quarter earnings season in August.

Futures markets indicate that hedge funds have already placed bullish bets on copper specifically. Weekly data from the Washington D.C.–based Commodity Futures Trading Commission shows that bullish speculative bets on the commodity price are reaching the 10-year peaks set in mid-2018. (Chart posted on social media here)

Metals and energy stocks have a lot of room to play catch up. So far in 2020, the S&P/TSX Diversified Mining Index trails the S&P/TSX Composite by more than 16 per cent. The energy sub-index lags the benchmark by more than 27 per cent.

The success of the commodity-based investment theme will depend on continued improvement in global economic data, but it appears to offer considerable upside if the recovery persists.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Story continues below advertisement

Stocks to ponder

Canadian Imperial Bank of Commerce (CM-T) This stock has been saddled with a curiously low valuation for years, frustrating investors who feel the bank should trade in line with its Big Six peers. Good news: CIBC’s strong performance during the coronavirus pandemic may at last rescue the stock from the bargain bin. David Berman shares his thoughts. (for subscribers)

Tesla Inc. (TSLA-Q) Given the stock price, one might be led to think that Tesla is firing on all cylinders and has no competition. While it is definitely faring better, there are a host of strong rivals that are a who’s who of long-established enterprises, such as Ford, GM and Volkswagen, as well as relative newcomers such as Rivian Automotive LLC. Though Tesla might have had a healthy head start, the firm can indeed be brought down to earth by other players seeking their own market share. The Contra Guys share their thoughts on the skyrocketing stock. (for subscribers)

The Rundown

Why does the investment advice business hate young people?

A millennial with a six-figure income and a fair-size portfolio is looking for an investment adviser. It’s not going well. Here’s probably why: investment advisers are increasingly often paid through fees set as a percentage of a client’s assets. Big accounts are needed to generate the fee revenue that big investment firms demand from their advisers, which excludes even successful millennials on the rise. Rob Carrick explains further. (for subscribers)

Story continues below advertisement

Warren Buffett’s big bet on Japan could turn on higher inflation, weakening U.S. dollar

Berkshire Hathaway Inc.’s US$6.2-billion foray into Japan’s five largest trading houses may signal billionaire Warren Buffett’s expectation that inflation and a falling U.S. dollar may make international equities more attractive when economies worldwide recover from the coronavirus pandemic. David Randall and Svea Herbst-Bayliss of Reuters report. (for everyone)

Tesla and Apple should have thought twice before splitting their stock

Tesla Inc. and Apple Inc. split their stocks on Monday, a move largely hailed as a way to draw in new investors. It seemed to work - for now. Shares in both stocks soared. But John Reese discusses why this may not be the best thing for the two companies in the long term when it comes to their shareholder base. (for everyone)

Others (for subscribers)

Wednesday’s analyst upgrades and downgrades

Story continues below advertisement

Tuesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: Board chair invests over $3.8-million in this REIT yielding 9%

John Heinzl’s model dividend growth portfolio as of Aug. 31, 2020

Number Cruncher: Teaching your kids about investing? Consider these nine stocks

Others (for everyone)

Investors shun Thailand as growth weakens, political protests heat up

Story continues below advertisement

Globe Advisor

Three important facts about RESPs that Canadians need to know

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

What’s up in the days ahead

Warren Buffett is placing a big bet on Japan. Should investors follow suit? Ian McGugan will have some thoughts.

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

Story continues below advertisement

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies