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

RBC Capital Markets real estate analyst Pammi Bir reviewed third quarter earnings for REITs and reiterated top picks in the sector,

“Our view: Our Outperform ratings are intact and include Allied, Boardwalk, BSR, CAPREIT, Chartwell, Colliers, Dream Industrial, FirstService, First Capital, Flagship, Granite, InterRent, Killam Apartment, Minto Apartment, Morguard Residential, RioCan, SmartCentres, and StorageVault. Q3 results were largely in line with our calls, with FFOPU growth gaining some steam on strength in fundamentals across multiple subsectors. Notably, organic NOI growth remains well above historical levels. Still, our earnings outlook for the year ahead and NAVPU estimates were dialled back, partly on headwinds from higher interest rates. Indeed, uncertainty surrounding the direction of rates and economic traction has likely impeded stronger fund flows into the space. Hence, our preferred picks remain mostly skewed to where we expect operational and earnings resilience to hold up comparatively better, particularly in multi-family (incl. manufactured housing), industrial, select seniors housing, self-storage, and defensive retail’


BMO chief strategist Brian Belski is among the first to publish an outlook for Canadian equities for 2024,

“Canadian investing trends in 2023 were dominated by macro data points (actual and potential – that have yet to transpire by the way), resulting in the S&P/TSX posting its worst performance versus the S&P 500 since 2015 … We believe the depth of underperformance underscores the paralyzing pessimism that traditionally persists in Canada relative to the increasingly clear fact that recent softness in domestic economic activity is more than priced in at current valuations. Furthermore, the economic “Armageddon” that most investors have been basing their investment decisions on for the past several months has not occurred … as growth begins to re-accelerate in the second half of 2024, we believe … pessimism will turn to optimism, driving a long-overdue valuation expansion into the end of the year. Overall, while our initial target was not reached in 2023, we believe the rebound we expected for the Canadian stock market was only just delayed as investors digested the impact of higher rates ... We believe the TSX can and will attain higher prices with a 2024 year-end price target of 23,500 on earnings of $1,500. This represents just over a 16-per-cent return based on our current price and a multiple improvement to 15.7 times from the current level below 14x – still well below the long-term average multiple of 17 times. Yes, Canada is the contrarian call in 2024″

BMO chief economist Doug Porter is predicting domestic GDP growth at a meagre 0.5 per cent for 2024.


Wells Fargo U.S. equity strategist Christopher Harvey is cautious on equity prospects for 2024 and recommends defensive portfolio positioning. He has upgraded utilities, telecom and healthcare to overweight from neutral, and downgraded energy and industrials to underweight on growth concerns,

“Rate Risk. We believe the biggest equity risk is the level/volatility of the cost of capital as the marginal buyer of Treasuries (i.e” US households) is much more price sensitive There is real risk of another Treasury supply shock as net issuance growth is in the double-digits, but institutional and foreign investors are limited… For long-only PMS, it is time for significant change — including personnel (starting with risk managers). Within Tech, Value analysts should be given the reins”

The issue of Treasury issuance – large deficits driving too much bond supply relative to demand – is getting more attention as a potential problem. It would result in higher borrowing costs than economic conditions imply.


Diversion: “There’s been a survey. Are these the best guitar riffs of all time?” – A Journal of Musical Things

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