Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief strategist Brian Belski argued that communications services stocks are the best sector for dividend investors,
“Despite broad underperformance versus the other high-yield sectors over the last 12 months and since the March 23, 2020 lows, Communication Services remains our preferred equity income sector in Canada. Overall, despite some near-term growth challenges, we believe Communication Services continues to offer the better risk/reward among the high-yielding sectors given the longer-term consistency of the sector. In fact, our work has consistently shown Communication Services has many of the hallmarks of a sector with sustainable long-term dividend growth potential, while still offering among the highest yields in the TSX … The sector is only up 40% from the March 23, 2020 lows, underperforming the TSX and all other high-yield sectors over this period. Despite this underperformance, Communication Services is expected to have the strongest dividend growth of the high-yield sectors, and has a dividend yield above most of the other higher-yielding areas of the TSX”
BMO analyst Tim Casey ranks all of the major telecom providers – Rogers Communications Inc., Telus Corp and BCE Inc. as “outperform.”
“@SBarlow_ROB BMO’s fave sector for Canadian dividend investors” – (research excerpt) Twitter
U.S. inflation-adjusted (real) yields have been a key driver of equity valuations as I detailed in a column last week.
Ten-year real yields are deep in negative territory, but Citi’s global macro strategy team believes they are about to climb, supporting technology and gold stocks,
“Ever lower US real yields are becoming a “conundrum”. The rates rally since Q1 can be explained by a combination of technicals, financial repression and patchy economic data relative to consensus expectations. But with a Fed that has pivoted hawkish, more fiscal on the horizon and signs of a capex boom, we expect real rates to move higher post-summer. Until then, tactically, the USD looks rich, gold and tech stocks look cheap. But in one sense, perhaps asset markets that are not being bought by the Fed are already beginning to price higher real yields. We keep a close eye on copper/gold, as this has been a reliable indicator for US yields in recent years… the current tactical regime can be defined as “stagflation surprise”, where the US ESI [economic surprise index] is in/ close-to negative territory but inflation surprises remain close to the all-time high”
“@SBarlow_ROB Citi’s global macro team sees ‘stagflation surprise’ as temporary” – (research excerpt) Twitter
RBC economists Nathan Janzen and Rannella Billy-Ochieng continue to track trends in Canadian consumer spending,
“Canadian household spending remained well-above pre-shock 2019 levels in July building on June’s gains. Spending continues to rotate to the hard-hit hospitality and travel sectors, although spending on physical merchandise also edged higher … RBC data shows retail sales (excluding services) increased by 2% to date in July on a seasonally adjusted basis - reversing much of the remaining softness seen in over the third virus wave. Western provinces are leading the recovery in travel spending; central Canada lagging. Against an increasingly more optimistic backdrop, Canadians are finding more ways to socialize outside their homes with recreational goods and clothing sales drifting higher. "
“@SBarlow_ROB RBC economists track trends in Canadian consumer spending” – (research excerpt) Twitter
Diversion: “John McAfee Virus Infects QAnon " – Gizmodo
Tweet of the Day:
Equal-weighted S&P 500 moving lower relative to cap-weighted S&P 500, just as 2s10s Treasury yield curve maintains current downtrend— Liz Ann Sonders (@LizAnnSonders) July 29, 2021
[Past performance is no guarantee of future results] pic.twitter.com/eO6lN8cJDH
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