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

BMO economist Robert Kavcic noted that a lot of big names in the domestic stock market are not participating fully in the rally,

“The TSX too is flirting with record levels, but while leaving many, many, big-name companies behind. Note the massive disparity in sector returns in the chart, where technology is up more than 40% from the pre-COVID high, while energy is down roughly 30%. Here are some big names still sitting on double-digit declines this year, even as the TSX is off only 8% (as of Tuesday around noon): Bombardier (-76%), Cineplex (-73%), Air Canada (-66%), Suncor (-48%), RioCan (-39%), Teck Resources (-35%) , Gildan (-30%) Blackberry (-24%) , Canopy (-21%) , Manulife (-21%) , Scotiabank (-20%), Nutrien (-17%), Enbridge (-13%) Rogers (-12%).”

“@SBarlow_ROB Some big Canadian names lagging the TSX badly (BMO)’ – (research excerpt) Twitter

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Scotiabank strategist Hugo Ste-Marie recognized a recovery in domestic value stocks in a Wednesday report,

" Canadian Value is having a pleasant August after a rather horrendous start to the summer. Our SQoRE Canada Top 30 Value list is outperforming the TSX Composite by 4.1% MTD (total return). Meanwhile, Growth and Momentum (mostly Gold miners and Tech) are suffering setbacks after a strong June / July run. .. Not surprisingly, Canadian Financials, Industrials, and Energy, all with strong Value characteristics, are also leading on a MTD basis. We believe investors have been bidding up banks ahead of their Q3 results, betting that banks’ PCL won’t rise much more from previous highs… Moreover, with spot oil prices back above consensus estimates for the next few quarters, Energy names may have further earnings upside. They have been leading on the EPS revision front for the last few weeks. Overall, a successful bank earnings season and a sustained WTI recovery into the fall could keep this trade going, and allow Value to close the 2020 performance gap with other styles (-18% underperformance vs. the TSX YTD vs. +7.1% for Quality, +8.5% for Growth, and +9.7% for Momentum)'

“@SBarlow_ROB BNS: “Value Making a Catch-Up Trade in Canada As Banks Start Reporting”' – (research excerpt) Twitter

See also: “A major U.S. bank thinks inflation is just around the corner - and that’s good news for Canadian stocks” – (repeat link: Wednesday print column) Barlow, Inside the Market

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Ritholtz Wealth Management highlighted the incredible dominance of large cap tech stocks in U.S. equity benchmarks,

" When I first made the version of my infamous pie chart in July 2018, the five largest stocks in the S&P 500 had a market capitalization that equaled the smallest 282 stocks in the index. Ahh, simpler times. That number is now 389. Since then, the big five have added $3.5 trillion in market cap. Apple alone, the biggest of them all, is now as big as the smallest 201 stocks in the index”

“Modern Market Cap Theory’ – Irrelevant Investor

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Citi U.S. equity strategist Tobias Levkovich noted the difficulties making corporate profit forecasts and the transparency is welcome,

" Calculating forecasts is particularly challenging when one has no assurance of “normalcy” given the inability to time widespread vaccine availability and effective therapeutics… the notion of inoculations plus related economic improvement seems probable by 2H21. And, 2Q21 should have a fairly easy comp when considering 2Q20′s depressed results (off 33%+ y/y) … we suspect that the biggest drags on S&P 500 EPS may include the Materials and Energy sectors given lead indicators, while Tech may continue to benefit from capex trends. Consumers should be helped by better employment data after the plunges seen in March through May, but the willingness to spend more aggressively will most likely occur when health fears subside and one can expect pent-up demand too. In this regard, areas such as travel, leisure and hospitality could enjoy some of the largest bounces in the next 12 months.”

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Newsletter: “The chart that should worry you” – Globe investor

Diversion: The Ringer’s Teen Movie Bracket is equal parts entertaining and maddening,

“The Teen Movie Bracket: The Sweet 16 Is Loaded” – The Ringer

Tweet of the Day: “Global real house price inflation was still slowing down on the eve of the #Covid19 pandemic at 0.7% year-on-year in the first quarter of 2020. Growth in real residential property prices accelerated to 2.0% bit.ly/3b1h4Qv " – Twitter

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