In this edition we discuss an analyst’s view that bank stocks are already pricing in better conditions in 2026, and then provide a list of tax-loss selling options. The diversion is bad news for top 30 over 30 winners and we look ahead to important data releases coming up.
Andrew Lahodynskyj/The Canadian Press
Financials
Pricing in 2026?
Scotiabank analyst Meny Grauman caught me with the clickbait research headline Q4/24 Bank Preview — Is The Market Setting Itself Up for Disappointment? It was clickbait because the answer is no - the conclusion was that there is not a lot to worry about in the medium term. The research report was, however, full of useful insight so I’m leaning towards forgiveness.
The S&P/TSX Bank Index is up 18 per cent since early August. That’s without dividends but includes TD’s volatility and meagre 2.3 per cent return for the period. The broad strength in the sector has occurred despite an operating backdrop characterized by deteriorating credit fundamentals and sluggish loan growth, according to Mr. Grauman.
There is reason for concern in the short term. The upcoming earnings reporting season for the banks begins with Bank of Nova Scotia on Dec. 3. Mr. Grauman’s estimates imply 7 per cent year-over-year profit growth for the sector. This sounds OK except that it means a 6 per cent quarter-over-quarter decline and doesn’t say much for earnings momentum.
The analyst believes the current rally is justified despite the potential for near-term volatility. He believes that markets are looking through upcoming loan loss provisions and focusing instead on bank management forecasts for better conditions in 2026.
Mr. Grauman is particularly constructive on CIBC, Royal Bank and (gasp!) TD. In the latter case he notes that expectations are extremely low heading into earnings season and he expects results to reflect underlying strength in Canadian operations and stability in U.S. revenue. The analyst adds: “Any constructive forward guidance would be a big plus and is clearly not being factored into the bank’s current valuation.”
CIBC remains Scotiabank’s top pick even though it’s already jumped $20 per share and 28.8 per cent since the beginning of August. Revenue per share estimates continue to climb.
This report does not have me running to my brokerage account to buy bank stocks. It suggests that they might come cheaper in the weeks ahead as the market digests weaker earnings reports. I’m not entirely comfortable buying anything now on the promise of better times that are at least 12 months away.
This skepticism could be based on short-term factors. My weekly Monday report finds that the TSX as a whole is currently well overbought and vulnerable to a temporary pullback. Admittedly the metric I use, Relative Strength Index, can change very quickly but CIBC specifically is the second most technically extended stock in the benchmark.
Taxation planning
Practical advice for tax-loss season
Scotiabank strategists Hugo Ste-Marie and Jean-Michel Gauthier helpfully provided a list of tax-loss selling options. Importantly, they also include switch opportunities. They write that market history shows that tax-loss selling strategies are “suboptimal if the proceeds are not reinvested into an asset with a similar economic exposure.” (For a primer on how to effectively use tax-loss harvesting, John Heinzl produced this tipsheet a couple years back.)
The table below shows the lagging performers. If you’re viewing this on email, you can click here to see the online version of this newsletter, which contains an expanded table that includes stocks and units investors are recommended to switch to, and expected returns by Scotia analysts.
Diversions
Top 30 under 30 and fraud charges
Gizmodo’s Another Forbes 30 Under 30 CEO Is Indicted for Fraud story introduced me to a bizarre trend. The story concerns a company named AllHere Education and its CEO Joanna Smith-Griffin. A Manhattan federal court has accused the company of sundry financial shenanigans including falsifying results and misusing corporate funds.
AllHere Education has now filed for bankruptcy. The operation was exposed when an investor “contacted the company’s accountant - instead of getting updates directly from Smith-Griffin, as investors had previously done - and received an accurate financial statement.”
Ms. Smith-Griffin joined 2019 Forbes 30 under 30 alum Charlie Javice, and Forbes class of 2021 Sam Bankman-Fried, the crypto exchange guy, as former winners under investigation. Mr. Bankman-Fried’s colleague, Caroline Ellison, made the Forbes list in 2022 before pleading guilty to seven criminal charges in December of that year.
The essentials
Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page.
Globe Investor highlights
The hope of fixing a glaring flaw in the Canadian investor protection system is fading fast, reports Tim Shufelt.
David Berman has some suggestions on how to find the next top performer in the Canadian banking sector. And John Heinzl answers a burning question: My Royal Bank stock has doubled. Should I take some profits, or let it ride?
Billionaire investor Ken Fisher warns investors against greeting Donald Trump’s new term with preconceived pessimism. Meanwhile, global strategist Jay Pelosky thinks Trump’s victory may ultimately prove to be the catalyst that the rest of the world needs to end the U.S. market’s long record of outperformance.
Maybe - just maybe - Boeing shares are worth a look now for contrarian investors, says Contra Guys columnist Philip MacKellar.
What’s up next
The domestic calendar is light this week but the one economic data point is an important one - third quarter GDP. Economists expect 0.9 per cent annualized and 1.7 per cent year over year. For earnings, there’s only Alimentation Couche-Tard for TSX 60 stocks, to be released late Monday. C$0.763 per share is expected by analysts.
The Americans have their Thanksgiving this week so their calendar is light too. Third quarter U.S. GDP will be released Wednesday, with 2.8 per cent annualized growth forecasted by economists.
The interesting earnings reports will all be on Tuesday as Analog Devices Inc. ($1.647 per share expected), Dell Technologies Inc. ($2.049) and Crowdstrike Holdings Inc. ($0.813) all releasing profit results.
See our full economic and earnings calendar here (You can bookmark the page - it gets updated weekly)