Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The research team at RBC Capital Markets published their first-ever global real estate outlook which begins with a summary and top picks,
“In our inaugural global report, we summarize the outlooks of our Canadian and U.S. real estate research teams for 2024. While real estate fundamentals are driven by local market conditions, we see several parallel themes that will likely heavily influence returns in both markets. Indeed, as recent weeks have showcased, rising anticipation of a shift to monetary policy easing in 1H/24 and stabilizing (or ideally falling) yields at the long-end of the curve could provide further stimulus for sector fund flows and valuations. Laggards will likely continue to play some catch-up. Still, our global best ideas are anchored in subsectors where we expect operating fundamentals to exhibit resilience amid a decelerating economy and high-quality, yet discounted names facing temporary headwinds. Namely, our basket includes COLD, DIR, FR (Canadian and US industrial), CSH, VTR (Canadian and US seniors housing/healthcare), KMP (Canadian multi-family), TCN (US single-family rental), and MHC (US manufactured housing) … After a year of mixed performance for Canadian and US REITs, we believe the macro picture lines up well to support healthy returns in the year ahead. Our constructive outlooks use RBC Economics’ 2024 forecasts as our base case, including a decelerating North American economy, both central banks pivoting to rate cuts in Q2/24, and stabilizing long bond yields. Notably, REITs tend to perform comparatively well in slower growth environments and ahead of initial rate cuts in easing cycle”
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BMO senior economist Sal Guatieri underscores the huge scale of immigration into Canada by comparing it with U.S. data,
“On Tuesday, StatCan reported a record annual increase in Canada’s population of 1.25 million in the year to October, to 40.5 million. That same day, the Census Bureau reported that the U.S. population grew 1.6 million in 2023 to just shy of 335 million. In percentage terms, Canada’s population soared 3.2 per cent, or more than six times faster than the U.S. rate of 0.5 per cent. A 1.26 million increase in the number of immigrants and net non-permanent residents drove Canada’s population gain, while the U.S. number was led by a lesser 1.1 million increase in immigration. This means homebuilders should be a lot busier north of the border, right? Wrong. Canadian housing starts continue to trend at around 17 per cent of U.S. levels, as before the pandemic and even seven years ago when the population started ramping higher. Affordability could remain strained in Canada until this changes.
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BofA Securities weekly Flow Show report is its usual blunt and interesting self,
“Flows in 2023: record $1.3-trillion inflow to cash, record $177-billion to USTs, $162bn to IG bonds, $152-billion to global stocks, $125-billion to US large cap, $44-billion to tech vs. record $33-billion redemptions from TIPS, $37-billion from EM debt & record $73-billion redemptions from U.S. value funds … Weekly Flows: outflows across the board from gold ($0.3-billion), bonds ($2.1-billion), stocks ($21.3-billion), and cash ($26.1-billion).”
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Diversion: “The Most Captivating Spaceflight Images of 2023″ – Gizmodo
Scott Barlow