Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Top bank picks from BMO
BMO analyst Sohrab Movahedi is not yet concerned about credit risk for the major banks and he reiterated top picks in a Thursday report,
”While we see some new/incremental credit pressures (for example widening credit spreads; higher oil prices) since the banks reported their Q1/26 results, we believe they are navigating this complex operating environment from a position of strength, with solid allowances for credit losses and strong underlying loan book quality. We also take comfort in a largely intact 2027 macro outlook. Our PCL forecasts across the ‘Big 5′ (excl. BMO) remain unchanged at 41bps/37bps in FY26/FY27 (an improvement from 47bps in the last 12 months) although the trajectory of credit normalization may change depending on the length of the Middle East conflict and persistence of trade-related uncertainties. All else equal, a 5bp change in our PCL assumptions would have a 2–3-per-cent impact on our EPS forecasts (about 30 basis points impact on ROE) across our coverage. Outperform-rated names remain TD, NA, RY, and CM.”
Office improved, industrials better
RBC Capital Markets analyst Pammi Bir highlighted improvement for office REITs but better entry points for industrial REITs in the current market,
“Our view: Big picture, some encouraging signs from CBRE’s Q1/26 office and industrial updates. National office vacancy continued to decline, with particularly strong momentum in downtown Toronto on rising return to office mandates. As availability tightens in higher quality assets and new supply deliveries drop off, we expect vacancy to fall further through 2026. However, we remain sidelined on the office REITs on weak 2026E earnings growth in both AP (down 45 per cent) and D (down 8 per cent), elevated leverage, and less appealing relative valuations. Uncertainty surrounding AI-related implications on demand may also restrain investor appetite. In contrast, we see better entry points in our preferred industrial picks of GRT (negative 14-per-cent P/NAV, 6.3-per-cent implied cap) and DIR (negative 17 per cent, 6.4 per cent), particularly on the pullbacks over the past month. As well, national industrial availability ticked down for the first time since late 2022, asking rents held steady after two-plus years of erosion, and new supply looks manageable. Higher long-bond yields and downside risks to economic growth amid heightened geopolitical tensions may have dampened investor sentiment. However, even if we cut our 2026E organic NOI [net operating income] growth in half, both names would still trade at sizeable 10-15-per-cent discounts to our proforma NAVs, backstopped by solid balance sheets”
‘Painful’ trade negotiations
Scotiabank analyst Patrick Bryden reports that trade negotiations between Canada, the U.S. and Mexico are likely to be messy,
“Diego Marroquín Bitar joined our Focus On USMCA publication initiative at an in-person event in Mexico City. Diego is a fellow with the Americas Program at the Center for Strategic and International Studies, where he leads the work of the U.S.-Mexico-Canada Agreement Strategic Initiative. A “painful extension” is the most likely outcome of the USMCA review, which could involve prolonged negotiations and concessions from Mexico and Canada to secure U.S. approval. Key contentious areas include Chinese investment, stricter Rules of Origin (RoO), especially for autos, and other economic security measures like foreign investment screening. The process has started late, making a clean, swift renewal by July 1 unlikely. The central question is not the USMCA’s survival, but what compromises will be required to find a ‘workable’ agreement and how North America’s competitiveness and security are impacted”
The kowtowing might be necessary but the thought of it is really irritating.
Bluesky post of the day
BOOCKVAR: “.. because foreigners own so much of US assets, that our markets are a source of funds for them. Here is a chart from the FT of foreign official holdings (central banks and governments) of US Treasuries that hit their lowest level since 2012.”
— Carl Quintanilla (@carlquintanilla.bsky.social) April 2, 2026 at 7:33 AM
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Diversion
“Conspiracy Theorists Are Going to Have a Field Day as NASA Gears Up to Launch Historic Moon Mission on April Fools’ Day” - Futurism