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

Morgan Stanley U.S. equity strategist Michael Wilson likes high-quality growth stocks,

“Quality growth shows strong, double digit relative returns over lower quality cyclicals in decelerating front-end interest rate regimes (based on equal weighted factor performance), a dynamic that typically persists for over a year. With front-end rates just peaking in October in anticipation of the Fed’s cutting cycle, the pair’s performance still nearly 20 per cent below 2020 highs, and quality growth once again showing relative strength over the last couple of weeks, we see potential for double-digit relative outperformance ahead. Further, relative earnings revisions for quality growth have inflected higher, pointing to an upside catch up in relative performance … We find that Software & Services, Capital Goods and Commercial & Professional Services possess the most attractive overall risk/reward score”

Mr. Wilson provided a long list of high quality growth stocks that are overweight rated at Morgan Stanley. Companies most likely to interest domestic investors include Netflix Inc., Alphabet Inc., Meta Platforms, Nike Inc., Lululemon Athletica, Monster Beverage, Colgate Palmolive, Estee Lauder, Mastercard Inc., Visa Inc., Nvidia Corp., Microsoft Corp., Adobe Inc., Palo Alto Networks, Apple Inc. and Linde PLC.


BMO senior economist Robert Kavcic published his full column on the domestic housing market late Friday,

“The Canadian housing market should enter a period of overall stability this year, with lower resale prices, easing mortgage rates and pent-up demand likely helping to set a floor for the market. But, a return to the rollicking price gains of recent years, and previous highs for some locations, is unlikely at this point … it is widely assumed that this tightening cycle is over which, from a behavioural perspective, is an important milestone—buyers know the ‘worst case scenario’ with respect to rates and can plan accordingly ... we’ve likely already seen peak Canadian mortgage rates for this cycle… Downward pressure on prices continues in some markets (namely Ontario), and we expect that to persist through the spring. But, the combination of pent-up demand and easing borrowing costs could finally put a floor under the broad market. In real terms, Canadian home prices have now largely adjusted back to their long-term growth trend … That said, affordability remains strained, which will limit the scope of any rebound … With expectations of price growth now deflated, cash flow is king again for investors, but the economics still don’t quite make sense at current prices and interest rates”

“Housing Outlook: Laying the Floor” – BMO Economics


J.P. Morgan global strategist Mislav Matejka is more bearish than most Wall Street forecasters,

“Q4 reporting season is ramping up. The activity momentum has generally decelerated in Q4, which calls for a sequential weakness in earnings delivery. In addition, pricing indicators are softening further, and corporate guidances might be muted by the renewed supply disruptions and the lack of visibility regarding the consumer outlook in particular, given some tough comps … Big picture, we think that corporate profitability will be under pressure over the next quarters, in order to fully unwind the positive COVID distortions driven effect. 2024 EPS projections keep coming down, in most regions - see bottom chart, and weekly EPS revisions are consistently negative again, especially in Europe. This is unlikely to change, in our view; we see risks to both pricing and to volumes for this year … he margins of Defensives are not far from historical trends. COVID distortions appear to have benefited Cyclicals more than the Defensives, and this is where the unwind could happen. We stay OW Growth vs Value, continuing last year’s style preference, keep OW US vs Eurozone, and believe that Defensives are set to perform better this year”


Diversion: “No One’s Name Was Changed at Ellis Island” – Marginal Revolution

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