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

BMO economist Robert Kavcic provided a counterintuitive fact for domestic investors,

“One simple fact is that, over the past 25 years, Canadian equities have been more tightly correlated to U.S. real GDP growth than Canada’s … Industry composition is always a big issue for Canadian equity investors, and the TSX has plenty of exposure to what is working now. The global inflation story is probably the biggest theme out there, led by soaring commodity and raw materials prices. Energy and materials account for a quarter of the index, or more than a third if we include industrials. Indeed, since October, eight of the top ten individual stocks in the TSX are in energy.”

“@SBarlow_ROB BMO: “One simple fact is that, over the past 25 years, Canadian equities have been more tightly correlated to U.S. real GDP growth than Canada’s” – (research excerpt) Twitter

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BofA Securities U.S. quantitative strategist Savita Subramanian has the technology sector ranked last among major industries and asks “Is this 2000 for tech?”

“Is this 2000 for Tech? We address these and other questions ahead of BofA’s Tech conference. Tech has been hurt by the Value rotation, which is likely to continue for a multitude of reasons in our view. We are marketweight Information Technology, underweight Communication Services. Why are we cautious? … Tech could be the biggest loser following G7′s recent backing of a new global minimum 15ppt tax rate … The poster child for globalization, Tech has the highest foreign exposure and benefited from labor, input cost and tax arbitrage. But globalization may pause or reverse amid U.S. and China tensions, supply chain risks revealed by COVID, and on-shoring incentives… Anemic economic growth since the Global Financial Crisis gave us a reason to seek out and pay up for strong, secular growth. But today, Tech EPS growth is forecast to be weaker than that of the S&P 500… So is Tech now a bubble? Versus 2000, the sector is higher quality, has superior profitability and shareholder returns, plus lower valuations. But its growth profile is meaningfully weaker than that of 2000”

“@SBarlow_ROB BoA: Is this 2000 for tech stocks?” – (research excerpt) Twitter

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Scotiabank strategist Jean-Michel Gauthier is comfortable with the longer term risk-adjusted outlook for North American utilities stocks but is not excited about them tactically,

“The well-known macro rotation into Value and Cyclical stocks from Growth has left utility stocks behind, with U.S. and Canadian utilities each trailing their respective benchmarks by 8% year-to-date. At a certain point, this raises the question: are utilities cheap enough? In this short report, Scotiabank GBM’s Quant team and North American utilities analysts conclude: not yet. While utilities are screening increasingly well for Value, stocks will likely continue to be hamstrung by their low betas and relatively low earnings growth as investors chase faster-growing sectors given a rising-yields and recovering-PMIs context. Moreover, in an “explosive growth” scenario (positive surprises to both inflation and growth), Quality-based strategies (so, Utilities) will likely continue to lag. We therefore view Utilities as remaining somewhat unattractive from a quant perspective given the much “hotter” competition out there. Still, focusing on names with better Growth profiles could allow for relative outperformance within the sector. Among our coverage, we recommend NEE, CMS, DTE, ALA, and EMA for Growth, and AEP, BKH, and EXC for Value. Fundamentally, we remain bullish on risk-adjusted outlooks and valuations”

" @SBarlow_ROB BNS: It’s not time to buy utilities stocks yet” – (research excerpt) Twitter

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Diversion: “You Can Only Maintain So Many Close Friendships” – The Atlantic

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