Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA quantitative strategist Savita Subramanian noted signs of life from U.S. value stocks - they have outperformed growth stocks by four percentage points in September – and believes the trend has further to run. Ms. Subramanian also provided a list of stocks providing both high quality balance sheets and attractive valuations,
“The main driver [of value outperformance] is the economy: various macro indicators point to an economic recovery … supporting cyclicals over defensive sectors. Value also outperformed coming out of 14 of the last 14 recessions for at least three months. Moreover, our US Regime Indicator has officially entered into a recovery phase, where Value outperformed 100% of the time by over 20ppt on average during this phase”
The stock picks list includes Comcast, Goldman Sachs, AT&T, Citigroup, East West, First Horizon, Allstate, Arch Capital, Boston Properties , KIMCO Realty, Medical Property Trust, Alaska Airlines, Parket Hannifin, AGCO , Kraft Heinz, Cracker Barrel, Medtronic, Labcorp, Mylan, Jazz Pharmaceuticals, Entergy, Exxon Mobil and Kinder Morgan.
" @SBarlow_ROB BoA: Top U.S. picks representing both high quality and value" – (table) Twitter
Scotiabank strategist Hugo Ste Marie noted that apartment rents in Toronto and Vancouver are “skidding” lower,
"While the Canadian real estate market is extremely strong, with both activity and prices surging, the rental market (apartments) is under pressure. The pandemic has caused some distortion in the supply-demand relationship. On the demand side, fewer foreign students, less immigration, people likely moving out of city centres toward the suburbs, and the rapid adoption of the WFH trend, which we believe is here to stay, could be issues for the sector. On the supply side, less tourism has also likely created an influx of short-term rental units (think of all the folks being unable to rent their condos on Airbnb anymore) on the LT rental market (competing against apartments)… the number of apartments listed in Toronto has sharply increased this year. All those factors pushed the average rent of a two-bedroom unit down 5.5% YOY in Q2, according to the Toronto Real Estate Board … However, another source providing more timely data (PadMapper) has the average rent for a two-bedroom unit off 12% YOY in September in Toronto (-14% in Vancouver)… We believe the real estate sector could continue to face some headwinds for the foreseeable future. "
"@SBarlow_ROB BNS: “Average Apartment Rent Skidding in Toronto"” – (research excerpt, chart) Twitter
Credit Suisse’s widely followed global strategist Andrew Garthwaite provided four reasons he believes investors should buy any dip in global equity markets,
" Overall fiscal and monetary policy remains much more stimulatory than it was post GFC; The ERP [equity risk premium – the extent earnings yield on equities exceeds bond yields] is at 7.3% (and should be closer to 5% even if ISM falls to 55); Excess liquidity is supportive and we are seeing the first signs of a bond to equity switch; We stick to an end-21 target of 317 (15% upside potential) for MSCI AC World ex US and see 3% upside by the end of this year."
“@SBarlow_ROB Credit Suisse: Four reasons to buy any dips” – (research excerpt) Twitter
CIBC foreign exchange analyst Katherine Judge sees weakness ahead for the loonie (my emphasis),
" Moves in the greenback will continue to dominate CAD momentum for the remainder of the year. On that score, we see scope for the USD to give up some of its safe-haven bid by the end of 2020 after a period of election-induced volatility. That could leave CAD slightly stronger to end the year, with USDCAD at $1.33. [CAD USD of $0.752]
In 2021, trade fundamentals should come into focus. A long run of red ink on trade suggests CAD is clearly overvalued, especially relative to trading partners apart from the US . The BoC has room to nudge the C$ weaker in 2021-22 by correcting the market’s current impression that it will hike ahead of the Fed."
"@SBarlow_ROB CIBC: “A long run of red ink on trade suggests CAD is clearly overvalued” - (research excerpt) Twitter
Diversion: “This is why boomers hate today’s pop music. Discuss” – A Journal of Musical Things
Tweet of the Day [relevant to CAD] :
#Copper trades lower on softening fundamentals after another big delivery into LME monitored warehouses has driving the cash to 3's spread back into a contango. With the spec long at a 2-1/2 yr high, China PMI Wednesday probably key to the s/t direction. pic.twitter.com/CSovKh2ppe— Ole S Hansen (@Ole_S_Hansen) September 29, 2020
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