Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Is the Canadian housing market reaching a peak? BMO economist Robert Kavcic sees price acceleration slowing, although the supply and demand imbalance suggests some further upside.
“Home sales in Toronto and Vancouver continued to cool in June, but let’s keep in mind that we’re still ‘cooling’ from astronomical levels. In both cities, sales activity remained above pre-COVID norms in the month. The overall market balance continues to support solid price gains. In Toronto and Vancouver, benchmark prices were up 19.9% y/y and 14.5% y/y, respectively. Detached homes continue to lead, but condo prices are showing positive momentum too. This is still a very strong market, but peak momentum is behind us. Prices in some segments might be finding resistance. It will be curious to see how this bizzaro cycle plays out from here— that is, does economic reopening and expansion lead to a softer housing market, rather than a stronger one (as in a ‘normal’ period)”
“@SBarlow_ROB BMO: Canada’s ‘bizarro’ housing market begins to cool” – (research excerpt) Twitter
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Orthopedics stocks are one of my favourite investment themes primarily because of population demographics, which is why I bought a position in Stryker Corp in late 2019. Citi analyst Joanne Wuensch’s most recent research report reiterated bullish ratings not only on Stryker but also on Abbott Laboratories, Boston Scientific Corp., Johnson & Johnson, Medtronic Inc., Nuvation Bio Inc. and Nevro Corp.,
“We hosted our second installment in the “Three Doctors in July” conference call series with a Neurosurgeon from Florida (Dr. Babu). The call focused on the physician’s spine and spinal cord stimulation (SCS) patients, highlighting that patient volumes have been steadily improving month-over-month, given meaningful pent up demand that should continue into next year. With patient comfort in returning to the hospital rising, she sees monthly volumes increasing sequentially in 2Q21 and expected to rise further in July, August, and September (she is delaying her vacation plans until the end of August and working weekends to address the increased volumes). She’s excited about the opportunity to utilize SCS devices for PDN (“a debilitating disease without a lot of options”) as well as NSRBP, and is looking towards using a spine robot (views as standard of care). We rate shares of ABT, BSX, JNJ, MDT, NUVA, NVRO, and SYK Buy.”
“@SBarlow_ROB Citi update on one of my favourite sectors” – (research excerpt) Twitter
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Also from BMO’s Mr. Kavcic, in a separate report, a warning about upcoming Canadian inflation,
“One of the themes of the BoC’s Business Outlook Survey was that businesses expect the economy to heat up through the second half of the year. That includes things like sales growth and investment intentions. At the same time, there seems to be a clear eye on quickly tightening conditions which are (or will be) leading to price/wage pressures. The combined share of firms with some or significant difficulty meeting demand jumped to the highest on record in Q2. At the same time, while labour shortages have not quite shown up significantly yet (though some industries are facing late-cycle pressure already), hiring plans jumped to a record high, and wage growth expectations (by firms) rose to the highest since the late-2000s. For monetary policy: This all suggests that conditions might be tighter than most think, or at least could become tight in a hurry. For fiscal policy: Firms are ready to hire in bulk; they’ll need workers in the labour force and are expecting to pay up. The case for ongoing pandemic-era support is waning fast. "
“@SBarlow_ROB BMO: Canadian inflation pressure building” – (research excerpt) Twitter
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Diversion: “U.S officials have revoked thousands of Canadian NEXUS cards” – CBC
Tweet of the Day: " @TheStalwart If you really believe a new, higher inflationary regime is coming, you can make a lot of money right now betting that the market is wrong” – Twitter
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Scott Barlow