Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities notes that with major network hacks occurring almost weekly, cybersecurity stocks are the place to invest in 2024,
“2023 was a strong year for cybersecurity stocks as IT budgets remained robust despite tough macro conditions. Heading into 2024, we remain positive on sector fundamentals, supported by growing enterprise cybersecurity budgets, platformization, and cloud transformation. Yet, we also flag a few risk factors. The industry reported on weaker billings, longer sales cycles, and increased spending scrutiny, and only time will tell if these are just minor adjustments to the business environment or the beginning of a slower cycle. In addition, valuation levels are fairly rich after the strong stock performances in 2023 … We maintain our Buy ratings on CrowdStrike and Zscaler, but favor the relative 2023 underperformers, namely Fortinet and CyberArk”
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BMO economists noted stronger than expected housing markets in Calgary and Vancouver yesterday and today it’s Toronto’s turn,
“Expectations of another BoC rate pause and even outright cuts by the spring look to have rekindled the smoldering embers in Toronto’s housing market. It’s the latest region to report improved existing home sales in December and, in fact, a whopping 21-per-cent gain from the prior month (seasonally adjusted). This puts unit sales back at June levels, just when the BoC was re-teeing another round of rate hikes. Active listings are also up, though supply remains relatively lean at 3.0 months. Still, benchmark prices look to have fallen for a fifth straight month (s.a.) and the yearly rate has turned slightly negative again. Bank of Canada rate cuts (starting in June, we suspect) and strong population growth driven by immigration should support a sustained rebound in Toronto area home sales and prices by the second half of the year, though poor affordability could see further price softness in the months ahead”
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Scotiabank strategist Hugo Ste-Marie sees four reasons the North American equity rally might stumble in early 2024,
“Four factors could challenge the equity rally entering 2024: (1) an upside reversal in LT bond yields; (2) Middle East conflict appears to be escalating; (3) technicals/overbought conditions are extremely stretched; and (4) muted/disappointing earnings guidance for 2024… The Q4 reporting season is about to start and companies will have to provide fresh guidance for 2024. Investors have been anticipating double-digit EPS growth in 2024 for quite some time now, and if companies are unable to deliver such upbeat guidance, negative revisions could increase as enthusiasm wane. We note that S&P 500 Q4 EPS has been reduced by 6% since September, going from US$57.37 to US$53.73 currently. 2024 EPS has been revised 0.9% lower over the same period”
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Diversion: “Our Most Anticipated Shows of 2024″ - The Ringer (podcast)
Scott Barlow