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

RBC energy analyst Greg Pardy updated his best ideas in the global energy sector,

“In May, the RBC Global Energy Best Ideas List was up 9.0% compared to the iShares S&P Global Energy Sector ETF (IXC) up 14.0% and a hybrid benchmark (75% IXC, 25% JXI – iShares Global Utilities ETF) up 11.3%. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 137.1% compared to the S&P Global Energy Sector ETF up 25.4%”

The stocks on the list are ConocoPhillips, Canadian Natural Resources Ltd., Enerplus Corp., Santos Ltd., Tourmaline Oil Corp., ARC Resources Ltd., Range Resources Corp., California Resources Corp., Tamarack Valley Energy Ltd., Ranger Oil Corp., Brigham Minerals Inc., Schlumberger Ltd., Secure Energy Services Inc., Cheniere Energy Inc., Altagas Ltd., Energy Transfer LP, Targa Resources Corp., The AES Corp., Algonquin Power & Utilities Corp., Drax Group PLC, and HF Sinclair Corp.

“RBC GLOBAL ENERGY BEST IDEAS LIST” – (table) Twitter

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U.K.-based Citi strategist Jamie Fahy is joining the chorus of bearish views on global risk assets,

“There are signs upside inflation momentum is slowing. But we don’t think that means the end of the rates and equity sell-off.  Yields not peaked — Even when inflation peaks, if the starting point of inflation is well above target, yields can take more than 12 months to peak. This was most evident in 1974 and 1980, even with the economy staring down the barrel of a recession … downside is still the path of least resistance. QT [quantitative tightening] is yet to hit full-tilt, and our risk parameters show that a large left tail [bear case scenario based on distribution of outcome analysis] is probable. Both global economic data momentum and global earnings revisions are negative. Our backtests show that these negative regimes see much higher levels of realised volatility, much lower expected returns and most ominously, much larger left-tail risk. With a central-bank-put difficult to engineer in a high inflation environment, we are sellers of rallies rather than buyers of dips.”

“Citi: ‘downside is still the path of least resistance”” – (research excerpt) Twitter

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BMO chief economist Doug Porter puts Canada’s disappointing GDP growth data in context,

“While headline real GDP came in lighter than initial estimates for Q1 at a 3.1% pace, this masked an ongoing surge in nominal spending. With the deflator powering up at a 12.2% annual rate in the quarter, nominal GDP surged at a 15.7% clip. Aside from the wildness of the past two years, that would rank as the fastest nominal growth in 40 years, and was actually stronger than expected (even with the miss on real GDP). As the chart suggests, nominal GDP has thus not just recouped all pandemic losses, but it has vaulted far above the underlying trend line prior to the pandemic. In contrast, real GDP was up less than 1% in Q1 from pre-pandemic levels—so still well below trend. This boom in nominal income has, in turn, boosted all sorts of nominal measures, such as government revenues, corporate profits, and household incomes. Unfortunately, the split in nominal GDP is increasingly heading more into rising prices than rising volumes. For example, in the past four quarters, nominal GDP is up 11.9%, split between a 8.7% rise in the price deflator and a 2.9% rise in real GDP”

“BMO: “With the deflator powering up at a 12.2% annual rate in the quarter, nominal GDP surged at a 15.7% clip. Aside from the wildness of the past two years, that would rank as the fastest nominal growth in 40 years” – (research excerpt) Twitter

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Diversion: “Canada’s fertility rate reached a record low in 2020: StatCan” – CTV

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