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

The global research team at RBC Capital Markets recently held a technology conference which resulted in some high conviction stock ideas,

“A number of software management teams talked about: 1) everyone is exposed to macro headwinds to some level; 2) true platforms winning and being able to consolidate spend in challenging economic times; 3) a focus on company-specific drivers or self-help elements; 4) an increased focus on public-cloud spend optimization; 5) a focus on overall spend management to drive higher margins in CY/23 despite what could be prolonged IT spending pressures; 6) some level of price increases that are more than historical price increases to help offset inflation; 7) feeling better about renewal opportunities vs net-new deals; 8) incumbency matters, especially in times of economic stress; and 9) M&A could pick up… Internet: Discussions and debates seemed to coalesce around 4 main topics: 1) durability of demand trends given significant near-term skepticism where discretionary categories are well known (or perceived as well known), 2) certain marketplaces have outsized take rate leverage which can protect profitability, 3) can idiosyncratic drivers offset a macro tidal wave if it comes and 4) cloud spend optimization … Renewed focus on streaming profitability … Our post-conference high-conviction ideas discussed in this note include: Software (CWAN, PWSC, NOW, ZD); Internet (SQSP, UBER); Ad-Tech (DV); Media (WBD); Cable, Satellite & Telecom Services (CMCSA); Business Services (CSGP, FDS); Payments (FOUR); Canadian Technology (KXS).”

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BofA Securities’ famously bearish investment strategist Michael Hartnett provided his look ahead to 2023 in his typical bullet point style,

“View: we stay bearish risk assets in H1, set to turn bullish H2 as narrative shifts from the inflation and rates ‘shocks’ of ‘22 to recession and credit ‘shocks’ in H1′23, then bullish ‘peak’ inflation, Fed, US$ in H2′23; recession … Long bonds in H1, maintain SPX nibble at 3.6k, bite at 3.3k, gorge at 3.0k entry points; Fed rate cuts … Long stocks and credit in H2 … BofA 2023 forecasts: CPI 8% to 4%, GDP 2% to <0%, Fed funds peaks 5% in March, UST 10-year yield to 3¼% by year-end, WTI oil peaks $104/bbl Q3 … in H2 … short US$, barbell IG tech and Asia HY bonds, long copper, industrials, small cap stocks, EU banks; avoid US tech, private equity stocks, Aussie/Canada banks in ‘23 … "

Mr. Hartnett expanded these summaries into a top 10 trade ideas. The tenth is to short Canadian, Australian and Swedish banks against EU banks because of “real estate busts.”

“Short Canadian banks (against long EU banks) among Hartnett’s top 10 trade ideas for 2023″ – (research excerpt) Twitter

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BMO senior economist Robert Kavcic published a short note entitled Some housing deflation in Canada,

“Canada’s new house price index fell 0.2% in October, the steepest monthly drop since 2009. That doesn’t sound like a big deal, especially for this somewhat obscure measure, but it is one that flows directly into the Consumer Price Index. The house-only component was also down 0.2% in the month, which will pull the CPI replacement component down more deeply in November. We’ve discussed in more detail elsewhere how the treatment of housing inflation in Canada is…interesting. While replacement cost and other costs associated with realtor fees are now in outright decline (and much earlier to break than in the U.S.), rent and mortgage interest costs are rising and will prove to be much stickier. PS: The weight of the latter two (9.5%) is just slightly smaller than the weight of the former two (10.9%)”

“‘Some housing deflation in Canada’ (BMO)” – (research excerpt) Twitter

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Diversion: “Webb Telescope Reveals Noxious Atmosphere of a Planet 700 Light-Years Away” – Gizmodo

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