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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Michael Batnick, director of research at New York-based Ritholtz Wealth management, wrote The Worst Kind of Sell-off , a piece about the pain of market rotations that I wish I’d written myself,

“It’s never fun to see your portfolio lose value, but some times are more painful than others … The S&P 500 is only 2% off its all-time high, but some names are getting absolutely torpedoed… What I’m about to say won’t take away the pain if you’re heavily invested in these growth names, but maybe you can use some context. Every big winner gets crushed from time to time. Every single one. Take a look at Apple. It’s one of if not the greatest stocks of all-time. It got cut in half 6 times … Not every stock is Apple. In fact, more often than not, they’re Research in Motion or Nokia.”

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The stocks getting hit hardest are some of the fastest-growing, most widely-held stocks. This includes Shopify Inc., Canada’s greatest recent technology success story. Even passive investors are getting hit by this, as the popular stocks have become big weightings within their respective indices.

“The Worst Type of Sell-Off” – Batnick, Irrelevant Investor

“@SBarlow_ROB From a great post by @michaelbatnick “The Worst Kind of Selloff”” – (excerpt, chart) Twitter

***

Scotiabank foreign exchange strategist Shaun Osborne is bullish on the loonie (my emphasis),

“Beyond an earlier reduction in its pace of QE, we also expect the Bank of Canada to be among the first major central banks to begin raising rates — due in great part to a faster return to on-target inflation. We anticipate that the BoC’s first 25bps hike will arrive in the final quarter of 2022, compared to the Fed which will first move in Q1-23 according to our latest forecasts. The BoE may also hike late next year, but it is expected to only slowly increase rates … Despite a new pandemic wave and a possible stalling of commodity price gains, the combination of the BoC’s tapering and rate increases on the horizon should see the CAD outperform through the remainder of 2021 as it extends its yield advantage over most of its advanced currency peers.”

“@SBarlow_ROB BNS is bullish on CAD " – (research excerpt) Twitter

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***

BMO economist Robert Kavcic continues coverage of the red-hot Canadian housing market by noting that the culprit for declining affordability might be the obvious,

“Calls are now growing wider and louder for some form of policy intervention in Canadian housing—namely on the tax front. To that point, there are various macroprudential tools available, each with their own pros and cons … At the end of the day, however, this falls on interest rates. Ultra-low mortgage rates and BoC guidance that they won’t be moving up are pure fuel for an already-strong market. Recall that it was two BoC rate cuts in 2015 that initially set a well-behaved market off to the frothy 2016/17 highs. And, while provincial tax measures helped break the strength in TO and Van, it was the BoC moving back to tightening that helped change the psychology. To be clear, we’re not forecasting BoC rate hikes until 2023. But if policymakers are serious about calming housing, this is the clearest solution that will change the psychology (and temper the market) in a hurry…”

“@SBarlow_ROB “Home Prices: Maybe the Simplest Answer is the Right One” (BMO)” – (research excerpt, chart) Twitter

***

Newsletter: “The end of the 40-year bull market in bonds” - Globe Investor

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Diversion: “The Crime of Refusing Vaccination” – (podcast) The Atlantic

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