Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank analyst Meny Grauman warns investors against chasing bank stocks,
“For all the pluses and minuses of this latest bank earnings season, almost every large bank we cover saw their consensus forward EPS estimates revised lower coming out of year-end reporting. And yet, the group as a whole is up about 7 per cent on average over the past month … For our part we continue to believe that market expectations have too quickly swung towards a soft landing scenario, and believe that ‘higher-for-longer’ remains a key risk for Canadian bank stocks even as investors run away from that thesis. As we head into a new calendar year the key question facing investors is, do you fight the tape and remain defensive or follow what appears to be an increasingly crowded trade higher? We continue to believe that the next few years are likely to be challenging for the Canadian banks and their ROEs, and as a result we maintain our more defensive bias rather than join the crowd. That said, we continue to highlight CM as the name likely provides the most torque to a soft-landing scenario”
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RB Advisors began their year-ahead report with the surprising observation that 2023 will be remembered as a year of extreme speculation because of the Magnificent 7 tech stocks and cryptocurrencies.
The research team, led by former chief U.S. quantitative strategist at Merrill Lynch Richard Bernstein, went on to tout what they believe are huge investment opportunities,
“2023′s speculation could make 2024 the beginning of a once-in-a-generation opportunity for investors willing to embrace diversification. The idea that there are only seven growth opportunities throughout the entire global equity market is categorically wrong … Healthy bull markets are typically characterized by broad leadership because a healthy economy benefits many companies. The Magnificent 7 leadership, therefore, implies an unusually dire economic forecast… The results of a screen we did searching for companies in the G-7 markets (US, Canada, UK, France, Germany, Italy, and Japan) that are currently forecasted to have earnings growth of 25 per cent or more. 169 companies passed the screen, but only three of the Magnificent 7 made the cut … With this backdrop, our portfolios enter 2024 with four embedded themes: U.S. Small Caps, U.S. Cyclicals, Non-U.S. and Emerging Markets, Industrials: Deglobalization spurs infrastructure”
“4 for ‘24: Year Ahead Outlook” – RB Advisors
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BMO senior economist Sal Guatieri reports on the slowing of domestic credit growth,
“Canadian household credit growth continued to moderate in October with the yearly rate easing to 3.1 per cent, the lowest on record dating back to 1991. (Coincidentally, it was also right in line with inflation in the month.) It’s also down from the cycle peak of 8.6 per cent in May 2022, suggesting little need for the BoC to further tighten policy. At the same time, the monthly moves appear to be stabilizing, hinting at a soft landing. Residential mortgage growth has ebbed to 3.5 per cent year-over-year from double-digit territory early last year, while consumer loan growth has faded to 2.2 per cent from a normal-ish 4.4-per-cent pace late last year”
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Diversion: “See the Breathtaking Power of Iceland’s Volcanic Eruption” – Gizmodo
Scott Barlow