Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Royal, TD and CIBC preferred
BMO bank analyst Sohrab Movahedi provided a preview of imminent bank earnings reports,
“Q2/26 earnings kicks off Wednesday with BNS (see preview here). We expect the benefits of the Canadian banks’ diversified business models will be on display again this quarter, with continued revenue tailwinds (NIM [net interest margin] and fee-revenue growth) balanced by muted loan growth and ongoing trade/geopolitical uncertainty; we forecast lower PCLs year-over-year (but remaining above through-the-cycle averages), reflecting large preemptive performing reserve builds last year. Our forecasts call for cash operating EPS growth of 19 per cent year-over-year and dividend increases at BNS (up 9 per cent; annual review), NA (up 5 per cent), RY (up 4 per cent), and TD (up 3 per cent; the latter all on semi-annual review). Current bank valuations sit at a premium relative to historical averages, reflecting strong sector fundamentals and more encouraging Canadian macroeconomic outlook. We maintain our constructive stance but are increasingly selective, favouring banks with the clearest pathways to sustained ROE and earnings durability relative to valuation. Our Outperform-rated names remain RY, TD, NA, CM, and EQB”
Taxes and Brain Drain
TD chief economist Beata Caranci believes taxes are to blame for Canada’s brain drain,
“Canada’s productivity challenges are magnified by the retention of top talent. Canada’s strong record of ed ucating and training globally-competitive workers and entrepreneurs is undermined by substantially higher personal taxes that draws those individuals elsewhere, particularly to the U.S., which has always been highly selective in attracting people from Canada’s upper tail. • The fundamental problem isn’t attracting talent but anchoring it: Canada produces strong research and educa tion outcomes but underperforms on commercialization, business R&D, tech adoption, and scaling firms, which lowers the domestic returns to skill and entrepreneurship versus U.S. innovation clusters. • Canada’s tax and incentive structure compounds the issue: high top marginal personal tax rates kick in at much lower income thresholds, while complex business tax rules encourage remaining small rather than growth. Strengthening incentives to scale over relocation or avoidance could reignite Canada’s innovation agenda”
Canada’s Silent Brain Drain – TD Economics
Nickel in demand
Morgan Stanley analyst Amy Gower is bullish on nickel prices,
“Indonesia’s changing policies, sulphur shortages and competition for power are tightening the nickel market: The >30 per cent cut to ore quotas, announced in Feb, puts 255 kt of nickel production at risk (6.5 per cent of global), with Weda Bay already halting operations as its quota runs out. Sulphur shortages threaten HPAL [high pressure acid leach] production (14 per cent of global), with Huayou Cobalt cutting the 130 ktpa (contained nickel) Huafei plant to 50 per cent utilisation and smaller cuts at other producers. Tsingshan [Chinese industrial conglomerate] as asked NPI [low quality nickel] producers to reduce output in June to free up power for aluminium. And raising costs: Soaring sulphur prices are driving HPAL operating costs sharply higher; with 10 tonnes of sulphur/tonne of contained nickel, the $10,240/t increase in sulphur costs would add $7,700/t to costs for spot-exposed producers. On top, Indonesia’s new nickel ore pricing formula adds $4,500/t to HPAL costs, although the feed through may be slower, with limited uptake so far … Batteries drive nickel demand growth: Stainless steel still accounts for ~62 per cent of nickel demand, but the growth has been, and will continue to be, dominated by batteries”
Bluesky post of the day
— Downtown Josh Brown (@downtownjoshbrown.bsky.social) May 26, 2026 at 7:54 AM
Diversion
“Scientists Just Found Evidence That Asteroids May Have Helped Create Life on Earth” - SciTechDaily