Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
National Bank economist Stéfane Marion posits the existence of a Canadian “housing affordability Armageddon,”
“The federal government’s decision to open the immigration floodgates during the most aggressive monetary tightening cycle in a generation has created a record imbalance between housing supply and demand. According to Statistics Canada, the working-age population surged 238,000 in Q2. That was the largest quarterly increase on record and 6.8 standard deviations from the historical norm of 82,000 per quarter. Unfortunately, Canadian homebuilders can’t keep up with this influx. Housing starts for Q2 2023 stood at 62,000 units (or 247,000 annualized). At just 0.26, the ratio of housing starts to working-age population growth fell to a new and stands at less than half its historical average of 0.61 (the ratio is normally below 1 to account for the fact that there is more than one person per household). To meet demand, builders would need to break ground on 144,000 units per quarter (or 576K annualized), double the best performance ever! As today’s Hot Chart shows, all 10 provinces are feeling the housing imbalance, with PE faring the worst with less than 0.1 starts per population growth. Among the Big 4 provinces, AB has the most depressed ratio at 0.17. As housing affordability pressures continue to mount across the country, we believe Ottawa should consider revising its immigration targets to allow supply to catch up with demand”
“NBF: “Canada: A housing affordability Armageddon?”” – (charts) Twitter
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Goldman Sachs’ Conviction List of top picks saw a number of changes for August,
“We add Chevron (CVX) and Macy’s (M) to the Conviction List in this August note, while removing Baker Hughes (BKR). Neil Mehta upgraded CVX to Buy on 7/31 with a focus on a cash flow inflection that should drive capital returns. While Brooke Roach’s analysis of M’s sales driving initiatives and self-help profit drivers leads her to be Street high on FY2 EPS.”
The remaining names on the list are Bath & Body Works Inc., WW International, American International Group, JP Morgan Chase, Blue Owl Capital, Tanger Factory Outlet Center, HCA Healthcare, Merck & Co., Vertex Pharmaceuticals, JB Hunt Transport Services, Johnson Controls International, PPG Industries, Republic Services Inc., Spirit Aerosystems Holdings, First Solar, The Southern Company, Apple Inc., Amazon.com, Salesforce Inc., Shift4 Payments Inc., TE Connectivity and Warner Bros Discovery Inc.
“Goldman Sachs ‘Conviction List’” – (table) Twitter
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Citi analyst Maximilian Layton highlights the surprising resilience of global copper demand and sees a potential buying opportunity ahead,
“Global soft manufacturing indicators for July remained weak despite improving slightly versus June. Despite this, we estimate total copper consumption for June rose 4.3 per cent year-over-year. — Announced policy measures in China are unlikely to precipitate an immediate economic turnaround. Further policy disappointment could drive a broader sell off across metals; this could create good medium-term dip-buying opportunities in copper. Our tracked copper consumption growth in 6M’23 averaged 4 per cent year-over-year. The disconnect between the hard and soft demand indicators is mainly due to the resilience in decarbonization sectors and certain cyclical sectors partly owing to a low base effect. We expect consumption growth to moderate as weakness in soft manufacturing indicators increasingly manifests itself through softer consumption in cyclical sectors, although the decarbonisation segment should remain resilient. Copper net speculative positioning suggests investors expect policy measures to drive a China turnaround. We think this optimism is misplaced … Overall positions are net long, and well above their 5-year average. (The data series began in 2018). We think this long positioning is vulnerable to an unwind and remain bearish near-term; our 0-3 mth copper pt price forecast remains $8,000/t”
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Diversion: “So, What’s Going On With Leprosy in Florida?” – Gizmodo
Scott Barlow