Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
TD senior economist Thomas Feltmate predicts that COVID-19 will reshape the U.S. office real estate sector for good,
“Looking across the major eastern metropolitan areas, New York, Boston and Miami are likely the most exposed to the downturn, given their current elevated supply pipelines… COVID-19 is also expected to have more lasting impacts on the demand for office space, as it helps to accelerate trends that have long been in the works well before the health crisis. Teleworking appears to be the biggest culprit, especially across those working in information, finance activities and professional & business services. Looking ahead, many companies and their employees may opt for a blended approach of work from home and time in the office”
Analysts covering Canadian office REITs have yet to sound any major alarms but the trend requires watching for investors in the sector.
“@SBarlow_ROB TD: “Pandemic Will Reshape The U.S. Office Sector” – (research excerpt) Twitter
“A bloodbath awaits commercial property investors” – Financial Times (paywall)
Goldman Sachs strategist David Kostin provided some interesting and counter-intuitive data in his Thursday report on foreign revenues for large U.S. companies (my emphasis),
“In contrast with the perceived trend of increased globalization, we find that foreign sales as a share of total sales in 2019 was the lowest in 10 years. The US accounted for 75% of S&P 500 sales growth during the past decade compared with 16% from Asia and 3% from Europe… Our FX strategists believe that the recent decline in the USD is just the beginning of a larger structural downtrend in the greenback driven, in part, by a further recovery in the global economy. They estimate that the USD may fall more than 20% from its recent peak”
My suspicion is that the combination of weak commodity prices, sluggish Canadian bank stock performance and strong technology sector returns, has left many domestic investors with large weightings in U.S. stocks. A 20 per cent decline in the U.S. dollar might be painful for these portfolios.
“@SBarlow_ROB GS” [Our FX team estimates] that the USD may fall more than 20% from its recent peak” – (research excerpt) Twitter
Long term readers are aware that my favourite investing sectors have been cloud-related technology and health care for a long time.
A Thursday Bank of America research report called “US Semiconductors: In cloud and growth we (resolutely) trust” supported my belief in continued cloud spending growth,
“We believe calls for “peaking” of cloud capex are premature, with our tracker (Table 2) suggesting 10% [half year over half year] capex growth in 2H and ~15% YoY in 2020. From 2014-19, capex grew at a 20% CAGR [compound annual growth rate], faster than hyperscaler sales growth of 16% CAGR, and this capital intensity could stay resilient… [We reiterate] top sector pick NVDA, top SMidcap picks MRVL, IPHI, top Semicap LRCX, Top 5G smartphone pick SWKS.”
For disclosure purposes, I am not currently long any of these stocks.
@SBarlow_ROB BoA on semiconductors: "From 2014-19, capex grew at a 20% CAGR, faster than hyperscaler sales growth of 16% CAGR, and this capital intensity could stay resilient" – (research excerpt) Twitter
Diversion: “I Was Mayor of Minneapolis. I Know Why Police Reforms Fail” – The Atlantic
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