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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Contrary to the newsletter I wrote yesterday, BMO economist Sal Guatieri sees signs of persistent U.S. inflation pressure,

“The latest JOLT survey (on Tuesday) showed the U.S. quits rate hit a record high of 2.9% of total employment in August. Workers are jumping ship due to COVID fear and vaccine mandates, and for better jobs and higher pay. If history is a guide, wage growth should ramp up in the year ahead. How much of it gets passed to costumers, as opposed to absorbed by earnings, will determine the persistence of current high inflation readings. I’ll take the over.”

“@SBarlow_ROB BMO: “U.S. quits rate hit a record high”” – (research excerpt) Twitter

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BofA Securities estimated the costs of achieving net zero emissions for the economy and they’re shockingly high, and disheartening to the extent that I’m not sure the political will exists to make this kind of sacrifice,

“This is the decade of climate action and COP26 [The 26th UN Climate Change Conference] will be the tipping point of the race to reach net zero emissions – the balance of reducing and removing carbon emissions from the atmosphere. To achieve it, a transition to clean technologies in all sectors at an unprecedented pace would be required, with the steering of governments and willingness of society. This is the last decade to act. Absolute water scarcity is likely for 1.8bn people, 100mn face poverty, and 800mn are at risk from rising sea levels by 2025. Climate migration could reach 143mn from emerging markets, driven by extreme weather. At the same time, $5tn of annual investments, $2tn of R&D, 42mn green economy jobs, and a cleaner planet could generate an unprecedented global opportunity … How much will it cost? $150tn over 30Y, 2x current global GDP. Will it be inflationary? Yes, expect 1-3% pa shock … At an estimated $150tn over 30 years, boosting funding sources to $5tn a year is equivalent to the entire US tax base, or 3x the COVID-19 stimulus this decade”

“@SBarlow_ROB BofA: “At an estimated $150tn over 30 years, boosting funding sources to $5tn [to achieve net zero emissions] a year is equivalent to the entire US tax base” – (research excerpt) Twitter

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Scotiabank strategist Hugo Ste-Marie sees more upside ahead for the loonie,

“Fundamentals continue to suggest there’s more upside ahead for the CAD. First, the Bank of Canada appears likely to hike its benchmark rate ahead of the Fed. Not only are price pressures visible on both sides of the border, but the Canadian economy has managed to recoup all job losses during the pandemic, while the US economy has only recovered 78%. Bond markets reflect this development with CDA 2-yr bond yields trading at 0.74%, which is implying almost two full rate hikes over the period. Moreover, the 2-yr bond yield differential with the US has not been this wide since 2014 at almost 40 basis points … The loonie tends to follow the interest rate differential over time and the last time the differential was near 40 bp, the CAD was trading at much higher levels. Secondly, strong commodity prices, from oil to copper, should also be supportive of the loonie. We believe the CAD is well positioned to re-test its June high. As shown in our lower Chart of the Day, the CAD has traded sideways between US$0.69 and US$0.825 for most of the past seven years. Breaking above that long-term trading range would be quite bullish from a technical perspective.”

" @SBarlow_ROB BNS sees more upside for the CAD” – (research excerpt) Twitter

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Diversion: “Everything you need to know about randomness in five minutes or less, including why it’s so valuable” – Quartz

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