Daily roundup of research and analysis from the The Globe and Mail’s market strategist Scott Barlow
BMO economist Doug Porter notes a cooling of the previously red-hot domestic housing market,
“The early indications for September are that home sales are cooling a bit, according to CREA … While analysts may sometimes veer into hyperbole, it’s tough to exaggerate recent housing tightness, especially given where many expected it to be in the wake of COVID … In August, the three-month average of sales-to-new listings has jumped to its highest level since 2004 (at 68.2%). A balanced market is generally seen as somewhere between 40-60%; with prices typically about flat at 50%. The current ultra-tight levels point to strong price increases. While we don’t believe gains will forge much beyond the latest 9.4% y/y clip, this is still the polar opposite of the dire calls on the housing market by some (ahem) at the April depths.”
“@SBarlow_ROB BMO: ‘piping hot’ Canadian housing market cools” – (research excerpt) Twitter
UBS U.S. equity strategist Keith Parker published an exhaustive 76-page report with an in-depth market forecast and a very specific list of top stock picks,
“We see the risk for US equities as tilted to the downside near-term based on the potential impact of catalysts (fiscal, election, COVID), particularly with the S&P above our model-implied level. However, our frameworks point to equity gains through next year … We identify stocks that are exposed to the key themes, leveraging UBS company analyst views and insights. We create a weighted composite score for stocks in the S&P 900 based on the variables in our scorecard: 1) production bounce, inventories and inventory/sales changes, 2) pricing/margin momentum, 3) sensitivity to vaccine news, 4) election risk based on potential tax impacts and beta to election odds, 5) yield, based on FCF [free cash flow], dividends and ’22 EPS, and 6) the level and change in NTM [next 12 months] and 3-5yr EPS growth as well as y/y FCF and 3mo change in NTM EPS.”
The list of picks is long. The most prominent names include Lockheed Martin Corp., Lowe’s Companies Inc., Amazon.com Inc. Charter Communications Inc., Electronic Arts Inc., NVIDIA Corp., Morgan Stanley, S&P Global Inc., Kinder Morgan Inc., IQVIA Holdings Inc.
" @SBarlow_ROB More UBS: top “macro to micro” U.S. stock pick" – (research excerpt) Twitter
RBC economist Eric Lascelles provided a useful summary of the major economic issues in a Tuesday research report,
“Has COVID-19 passed its peak? No, COVID-19 seems like to experience further waves over the fall and winter … Is the worst over for the economy? This is very likely. Subsequent waves of the virus have not required as austere social distancing rules as the first wave, because governments, businesses and households are getting better at maximizing activity while minimizing risk. Could there be a second recession? Setting aside the matter of whether two economic declines in short order would be considered separate recessions or simply components of one larger event, there is undeniably the risk of a subsequent decline. This isn’t our base-case scenario and it isn’t even obviously necessary as future waves of the virus come ashore, but complications relating to fading fiscal support, structural damage to a variety of sectors and a delayed reckoning for borrowers could conceivably induce another economic drop… Despite our acknowledgement that another recession is possible, we suspect the risk to our growth forecasts lies more to the upside than to the downside. The recovery so far has proven surprisingly brisk and the damage from subsequent viral outbreaks has been surprisingly mild.”
"@SBarlow_ROB RBC: “Is the worst over for the economy? This is very likely” – (research excerpt) Twitter
Diversion: “What Should Young Investors Read?” – Irrelevant Investor
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