Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
TD analyst Sam Damiani’s argument made in his report ‘Vaccine Mandates Expected to Give Office REITs a Boost’ makes sense to me (although that’s no guarantee of future performance of course).
“Although the pandemic has unfolded a lot differently than initially contemplated in our June 2020 upgrade of Office REITs, both the availability and fast (for the most part) take-up of vaccines have offered renewed visibility on the path to the “new normal”… The recent proliferation of vaccine mandates represents a tangible positive regarding investor sentiment towards office properties, in our view. Since August 13, when the Canadian government announced a vaccine mandate for all federal employees (including for many federally regulated industries), we have seen numerous similar announcements by other large employers, including provincial and municipal governments, and private-sector companies such as Sun Life, Shopify, and Rogers Communications. Late last week, this culminated in Canada’s five largest banks all announcing vaccine mandates for office and branch staff across their Canadian and U.S. footprints… We firmly believe that most employers are very keen to welcome staff back to the office to sustain/increase productivity, support and mentor new/younger employees, and promote and cultivate company culture.”
TD recently reiterated buy ratings on Dream Office REIT and Allied Properties REIT.
" @SBarlow_ROB TD: ‘The recent proliferation of vaccine mandates represents a tangible positive regarding investor sentiment towards office properties in our view’” – (research excerpt) Twitter
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B of A Securities chief investment strategist Michael Hartnett’s weekly report on investment flows was called Charts of Darkness , continuing a trend of increasing bearishness on his part. I’ve tried to summarize the text accompanying his most compelling charts:
“$32 trillion of monetary and fiscal stimulus; the Wall St reaction…global stock market capitalization up $57 trillion in 18 months; despite >5bn vaccines, societies & economies remain hostage to the pandemic, allowing Wall St to discount endless stimulus to the benefit of asset prices; the “end” of the pandemic will be v negative for Wall St, but few think it “ends” soon… the Delta variant in the past two months has caused “lockdown” [stocks] to outperform “reopening” [stocks] … the pandemic has not only dislocated local labor markets, it is also accelerating the trend away from globalization toward isolationism; local and global supply chains are unlikely to mend anytime soon…stagflation the new investment backdrop to markets… Fed’s determination to stoke Wall St exuberance & Main St inequality has been particularly positive to the US tech sector; the market cap of FAAMG + Netflix & Tesla equates to the 3rd largest country in the world in GDP terms … Inflation vs deflation: investors are structurally positioned for deflation; as cyclical bears we think H2′21 will see outperformance of high quality defensives; but we continue to argue that longer-term the inflation theme will win and the US dollar will lose … our BofA Global EPS model says global EPS peak was ≈ 40% in April (model driven by China FCI, Asia exports, global PMI, US yield curve); global EPS is projected to decelerate v sharply to 9% by November.”
“@SBarlow_ROB Bof A global EPS monitor ' – (chart, research excerpt) Twitter
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Citi global macro strategist Jamie Fahy also seemed to be in a cautious mood in a report released Thursday.
“Markets expect the Fed to announce a taper before the end of the year. The macro backdrop is one where soft data is cooling, China macro is not supportive, Global ESIs [economic surprise indexes that measure data versus consensus expectations] are negative and defensive assets are gaining momentum relative to reflationary assets. Negative ESIs won’t last forever, but we are reluctant to be positioned for reflation whilst this regime persists and liquidity from the Fed is set to be reduced… Cross-market signals are pointing towards strengthening momentum within defensive assets. In FX, JPY [Japanese yen] and CHF [Swiss frank] have outperformed the high beta/ reflationary currencies. In commodities, gold has been outperforming both copper and crude oil. In equities, defensive sectors are clawing back returns vs. cyclicals”
“@SBarlow_ROB Citi: ‘we are reluctant to be positioned for reflation whilst this regime persists and liquidity from the Fed is set to be reduced” – (research excerpt) Twitter
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Diversion: “The Poop About Your Gut Health and Personalized Nutrition” – Wired
Tweet of the Day: “@RobinWigg Dark " – Twitter
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Scott Barlow