Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO economist Robert Kavcic is following the number of Canadian business openings and closings (my emphasis),
“The number of active businesses in Canada plunged by more than 12% (103,000) between February and May, as COVID restrictions forced many to shutter, but the number stabilized in June. Note in the chart (seasonally adjusted) that openings have picked up, while closings continue to fall, with both above pre-pandemic norms. It’s interesting that economic output had rebounded by more than 11% by June, even though the number of active businesses hadn’t yet increased at all. This suggest that much of the early recovery was narrowly focused among firms/sectors that were able to handle the pandemic, and that there might be much longer-lasting damage across some affected industries and smaller businesses—none of that is a surprise.”
For investors, the ‘longer-lasting damage’ should first become evident among commercial landlords.
"@SBarlow_ROB BMO on Canadian business openings: " there might be much longer-lasting damage across some affected industries and smaller businesses" – (research excerpt, chart) Twitter
Citi analyst Scott Chronert published his list of “Value Creators,” the firm’s top picks for U.S. small and mid-cap companies. Strategists like Morgan Stanley’s Michael Wilson have noted previously that small and mid-cap stocks should outperform as more sectors benefit from the post-pandemic economic recovery.
The list has 19 members – Etsy Inc., PulteGroup Inc., OneMain Holdings Inc., Surgery Partners Inc., Guardant Health Inc., Epizyme Inc., Mercury Systems Inc., Oshkosh Corp., Knight-Swift Transportation Holdings Inc., Chart Industries Inc., Logitech International SA, Synnex Corp. Bottomline Technologies Inc., Entegris Inc., Science Applications International Corp., Dropbox Inc., Berry Global Group Inc., Eagle Materials Inc. and Hudson Pacific Properties Inc.
" @SBarlow_ROB Citi 'Value Creators": SMID top picks" – (table) Twitter
Also from Citi, global economist Pernille Henneberg reiterates a point made by colleague and strategist Matt King, namely that the inflation pressure caused by central bank stimulus remains trapped in financial markets rather than goods prices,
“Housing inflation was higher, or falling less strongly, in Q2 2020 than in end-2019 in eight out of ten economies, where data is available. In sharp contrast, CPI [consumer price index] inflation fell significantly in all ten economies during the COVID-19 crisis. The diverging trends between housing and CPI inflation are likely to continue, partly reflecting that CPI inflation includes rents rather than house prices. Indeed, rental prices in major cities dropped in Q2 unlike house prices … Weak labor markets and a collapse in firms' pricing power imply that the monetary easing is insufficient to boost prices. In contrast, housing is supported by cheap financing and record low real yields that make housing an attractive alternative investment. The supply-demand balance points to further house price increases in many economies.”
Newsletter: “Why the renewable power investment opportunity could rival the smartphone boom. Plus, three REITs for riding out the second wave” – Globe Investor
Diversion: “Vaccine Chaos Is Looming” – The Atlantic
Tweet of the Day:
BoA: 84% of S&P 500 assets are now intangible pic.twitter.com/YNjo94wWmL— Scott Barlow (@SBarlow_ROB) September 28, 2020
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