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

BMO chief economist Doug Porter notes that U.S. inflation is primarily in goods, not services. This supports the “transitory” narrative for inflation in that as services spending increases relative to goods, price pressure should subside,

“Inflation in services is incredibly close to the average pace of the past decade at just over 3% (median has been about 2.5%). In staggering contrast, CPI inflation for goods has soared above 9%, after barely having a pulse for the past 10 years. This reflects the combination of raging demand for all sorts of goods, and the widespread issues supply is facing trying to keep up. However, we would just pound home the point that such supply is actually at a record high. Aside: Canadian trends are similar, but (oh so typically) a bit less extreme. Goods inflation is 6.1%, services 3.0%.”

“@SBarlow_ROB BMO: “High Inflation: A “Goods” Thing?” – (research excerpt) Twitter


I don’t see a lot of Morgan Stanley research on the Canadian economy and the loonie so economist Christopher Collins’s recommendation to short the euro against the loonie was more notable this morning,

“At its October meeting, the BoC ended its quantitative easing (QE) and moved into a reinvestment phase during which it will purchase Government of Canada bonds solely to replace maturing bonds, which it said it will do at least until it raises rates. In its forward guidance, the bank remained committed to leaving its policy rate at its effective lower bound “until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved,” and updated its projection for when this would occur to “the middle quarters of 2022″ from “the second half of 2022″ … The October BoC statement and forecast revisions signaled a more hawkish outlook than the market expected, sending USD/CAD over 0.4% lower, dragging forward the date of [options market]-implied expected liftoff into the first quarter of 2022 and sending 2y Canadian yields above 1% for the first time since the onset of COVID. We recommend short EUR/CAD … CAD … already appears undervalued relative to 2y yield differentials. Higher oil prices should also boost CAD.”

“@SBarlow_ROB MS: “We recommend short EUR/CAD”' – (research excerpt) Twitter


TD updated their quantitatively-derived Canadian small-cap model portfolio by adding a 2.0-per-cent position in AcuityAds Holdings Inc.

The portfolio as it stands is 17.5 per cent allocated to energy stocks with NuVista, MEG Energy, Enerplus and Tamarack. The 11.4 per cent weighting in materials includes Methanex, Major Drilling, Stella jones and Copper Mountain Mining. Industrials (15.9 per cent) are Hardwoods Distribution, Cargojet, ATS Automation, Dexterra, IBI Group and Doman Building Materials. Consumer discretionary stocks (6.2 per cent) are Sleep Country, Park Lawn and Roots. North West (2.4 per cent) is the only consumer staples stock and Medical Facilities (2.8 per cent) is the lone health care pick.

Canadian Western Bank, Cannacord Genuity, Trisura and Equitable are the selections for financials (17.8). Docebo (3.4 per cent) is the choice for technology and Cineplex is alone among communications services stocks (3.7). In real estate (12.4 per cent) the picks are Tricon, Granite Industrial REIT, First Capital REIT and Storagevault.

“@SBarlow_ROB TD adds AcuityAds Holdings Inc. to its Canadian small cap model portfolio” – (table) Twitter


Newsletter: “Preparing for a decade of negative returns from the S&P 500″ – Globe Investor

Diversion: “Why a Gun Loaded With Blanks Can Still Kill You” – Gizmodo

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