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

The top-line number for Canadian home prices was strong in October, but National Bank analyst found signs of weakness under the surface,

“In October, it became clear that the recent trend in sales more than made up for the spring lethargy … The upward trend in home prices does not apply everywhere to all categories … In Toronto, the rise in sales was mostly concentrated outside downtown in dwellings other than apartments … the recent trend in apartment sales remained weak … [In greater Montreal] … a very significant increase in active listings for condominiums on the island of Montreal”

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“@SBarlow_ROB National Bank: Cdn home prices strong in October but weakness under the surface” – (research excerpt) Twitter

***

Citi strategist Hong Li observed a major change in market preferences,

“Factors rotated heavily in November and their volatilities exceeded highs seen in June as equity market reached new highs. Value outperformed the most while Price Momentum and Growth delivered worst performance since June. Healthcare is now the most crowded sector while defensive Utilities and Consumer Staples sectors remain least crowded. Value oriented sectors are mostly not crowded … The equity market has priced in higher 10-year yields, a stronger dollar and narrowing credit spreads, which is a more optimistic view than the bond market suggests … There is more upside for Value if the 10-year yield rises to 1.25% in 2021 as our rate strategists expect. While we are cautiously favorable to Value, for the near-term we recommend a barbell approach to overlay Growth and Earnings Revision on Value to mitigate the risk of new wave of coronavirus.”

“@SBarlow_ROB Citi: value outperforms but not crowded (unlike health care)’ – (research excerpt) Twitter

***

BofA Securities sees downside risk for the loonie as foreign appetite for Canadian assets falls,

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“The precipitous falloff in [foreign] appetite for Canadian debt (due in part we think to scaling back of BoC asset purchases) has vastly overwhelmed the uptick in appetite for Canadian equities, at the same time as Canadian appetite for foreign (emphasis: US) assets has sharply increased. We therefore remain concerned about Canada’s external financing prospects as well as its large, increasing bilateral deficit with the US. Given Canada’s persistent structural deficit (the result of deficits in the current account and net direct investment), net PI [portfolio investment] inflows are consistently needed. Accordingly, downside CAD TWI [Canadian dollar trade-weighted index] and upside USD/CAD and risks remain elevated on structural flow grounds, in our view.”

“@SBarlow_ROB BoA sees risks for loonie as foreign investment in Canada fades” – (research excerpt) Twitter

***

Nomura economists see a second wave of U.S. COVID-19 infections as a significant downside risk for the economy,

“The current surge in new COVID-19 is different from what happened earlier this year. First, the absolute number of new cases reported each day has now roughly doubled the peak the US experienced over the summer. Second, the pace of new daily deaths is widely expected to accelerate sharply over coming weeks and could eventually surpass levels experienced in the spring, suggesting material strain on local healthcare resources. These developments have encouraged a significant number of state and local governments to impose new restrictions on activity that, taken as a whole, represent the largest downside risk to the economic outlook from the virus since April.”

“@SBarlow_ROB Nomura: COVID 2nd wave threatens U.S. economic outlook” – (research excerpt, charts) Twitter

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***

Column: Tech stocks with the most to lose if market leadership shifts to value – Barlow, Inside the Market

Diversion: “Why conspiracy theories are on the rise” – Marginal Revolution

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