Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Canadians get so much news from U.S. sources that it often happens that we assume that a trend happening south of the border is also happening here when it’s not.
Wealth inequality is one example – it’s nowhere near as bad here as there – and as BMO notes, inflation pressure could be another,
“While Canadian CPI inflation displayed a fair bit of heat in May, it remains significantly cooler than its U.S. counterpart (3.6% versus 5.0%). On ex food and energy, Canada’s pace (2.4%) is similarly 1.4 ppts south of the U.S. clip (3.8%). And, this is not a new feature—looking at the 24-month pace in the chart, Canada’s underlying inflation rate has been a full point lower for two years now. Three factors help explain some of the gap: 1) the strong loonie has held back import prices; 2) used car prices aren’t spiking Canada’s CPI; 3) a later reopening is keeping a lid on affected sector prices. Implications: With such a wide gap in underlying inflation, it seems highly unlikely the BoC will lead the Fed in an aggressive way on normalizing policy.”
“@SBarlow_ROB Canadian and U.S. inflation are NOT the same” – (research excerpt) Twitter
Scotiabank analyst Mario Saric believes domestic REITs are set to play catch-up with the TSX and global peers,
“Canadian REITs have meaningfully lagged both the TSX and Global REIT peers during the pandemic. CAD REITs are -9% vs. Global REITs and -25% vs. TSX … Canadian vaccination rates are starting to catch up and even surpass global peers. Canada has one of the largest gaps globally between first-dose and full vaccination rates (64% and 11% of population, respectively); the 64% is the highest globally while the 11% is one of the lowest. We continue to prefer Growth over Value as broader valuations normalize. Top Growth Picks = BAM, CRR, DIR, GRT, IIP, MHC, SMU, SVI and TCN. Top Value Picks = AP, CSH, ERE, Top Income Picks = APR, CRR and CRT.’
“@SBarlow_ROB BNS: Domestic REITs ready to play catch-up with TSX and global peers. (SO=sector outperform)” – Twitter
Wells Fargo has interestingly built a research group called real asset strategy, covering global market sectors that should outperform during inflationary periods where the value of cash declines.
Strategist John LaForge writes,
" Despite a substantial rally in commodity prices off the March 2020 bottom, supply growth remains relatively low today. We see demand continuing to rebound throughout 2021 and 2022 as … the pandemic fades, and sizeable stimulus measures take effect to boost U.S. and global growth. .. We expect OPEC + to continue to take a disciplined approach in bringing idled or spare capacity back online … Oil prices should be well supported by this supply restraint and demand surge … we increased our 2021 year-end target [to] … $70-$80 per barrel… [global] REITs on average boast an attractive dividend yield, fair valuations, and relative performance versus other equities that is finally showing signs of life’
“@SBarlow_ROB Wells Fargo on global REITs” – (research excerpt) Twitter
Diversion: “The Last Images From Doomed Space Probes” – Gizmodo
Tweet of the Day:
We remain far from 1970s-style #inflation … looking at 2y changes in CPI and wages & salaries (to help account for base effects), growth rates are still quite low relative to history; wages aren’t even back to their pre-pandemic rate pic.twitter.com/RSmRYBnxDo— Liz Ann Sonders (@LizAnnSonders) June 17, 2021
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