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

RBC real estate analyst Pammi Bir reiterated his top picks as earnings reporting season continues.

“Our Outperform-ratings are intact and include Allied Properties, Boardwalk, BSR, CAPREIT, Dream Industrial, European Residential, First Capital, Granite, InterRent, Killam Apartment, Minto Apartment, Morguard Residential, RioCan, SmartCentres, Chartwell Retirement Residences, and StorageVault Canada Inc. On balance, Q2 results were largely as expected, as fundamentals continue to recover across most subsectors. Nonetheless, the sector continues to encounter stiff headwinds from higher rates and concerns of an economy shifting to lower gear. With this in mind, our recommendations remain skewed to names with resilient earnings and NAV growth profiles… several REITs acknowledged that write-downs are possible in 2H/22, particularly should private market transaction data suggest markdowns are warranted … several factors continue to weigh on the space, particularly the sharp rise in bond yields, uncertainty surrounding tax/regulatory policies, and slowing economic traction … we see better entry points on our preferred names, but acknowledge that wider-than-typical margins for error could persist until macro visibility improves.”

“RBC’s top picks in REIT sector” – (research excerpt) Twitter


Markets are likely to tread water until investors hear Fed chairman Jerome Powell’s comments from Jackson Hole on Friday. Citi U.S. equity strategist Scott Chronert, however, believes there’s bigger issues than Jackson Hole to follow,

“We expect that any revelations from Jackson Hole commentary will be marginal to the ongoing index vacillation between hard and soft landing expectations… Our single point 4200 year-end S&P 500 target reflects a balance of soft landing and recession scenarios. With several months to go in the year, volatility related to market interpretation of incremental macro and rate data points should be expected… Measures of economic activity are decelerating while inflation indicators are mostly plateauing. At issue going forward will be the Fed’s confidence in slowing activity to eventually drive inflation lower vs the perceived need to tighten until such time that inflation readings actually show a marked decline. Eye on ‘23 — Earnings expectations have begun to decelerate. We continue to expect resilience during 2H, with bigger risk to consensus a 1H ‘23 issue.”

The 4200 S&P 500 target is close to current levels so Mr. Chronert doesn’t see a lot of upside. Citi, like BofA and Morgan Stanley, continues to emphasize risks to earnings expectations - they just differ in terms of timing.


BMO chief economist Doug Porter reviewed commodity prices as we hit the six-month point since Russian forces invaded Ukraine,

“While energy led the way, prices for agricultural goods (notably wheat and corn) and base metals (notably nickel and zinc) also fired higher initially. The surge poured proverbial gasoline on an already raging inflation inferno globally. In the ensuing six months, there has been both separation among commodity groups and a general calming in prices. Metals have especially taken a step back on mounting global growth concerns, also undercut by a strong U.S. dollar. A basket of metals prices is now down almost 20% from pre-invasion levels and is now even below year-ago levels. In a somewhat similar vein, agricultural prices have dipped a bit below pre-invasion levels, despite the ongoing threat to Ukraine’s crop (not to mention simultaneous drought in many key growing regions—Europe, China and the southern U.S.). Meantime, with oil backing up again to well north of $90 (and Brent above $100), the energy basket is still notably higher than six months ago. The big story there is natural gas, the one major commodity that is far above pre-invasion levels. The strength in energy has been enough to push the overall commodity index up about 4% in the past six months, but that’s a much milder version than the initial 25% blast-off.”

“Commodity prices, six months after Ukraine invasion (BMO)” – (research excerpt) Twitter


Diversion: " Remember Your Beloved BlackBerry? It’s Now Getting Its Own Movie” – Gizmodo

Tweet of the Day: “CPI nowcast from @ClevelandFed has fallen to lowest (in terms of m/m change) since May 2021″ – Twitter

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