Barlow’s Research Roundup: Get used to expensive bank stocks, says Scotiabank analyst

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Bank stocks to stay expensive

Scotiabank analyst Mike Rizvanovic warns investors to get used to expensive bank stocks,

“We continue to believe that higher valuation multiples for the large Canadian banks are here to stay, justified by the group’s strong fundamentals, which are driving a higher ROE, and supported by long-term structural improvements related to: (1) a much stronger regulatory capital base; (2) far superior credit underwriting; and, (3) a growing Capital Markets business that provides a countercyclical revenue boost in times of heightened volatility. While we have been surprised by the magnitude of the improvement in the banks’ valuation multiples over the past year, which currently sit at record levels, we firmly believe that a new narrative has quickly formed on the group’s earnings stability and lower downside risk through credit cycles, which has brought in growing interest from foreign investors, and supports P/E multiples well in excess of historical levels. With that said, we anticipate modest total return upside for the banks over the next year (mid-single-digit range) based on our revised price targets that value the group using an average P/E multiple of 15.2 times … Foreign institutional ownership in the large Canadian banks has been rising over the longer term, reaching 19.3 per cent as of May 2026, the highest level in our dataset that goes back ~25 years, and materially above the very modest 4-per-cent level in the early 2000s.”

The analyst has “outperform” ratings on Bank of Montreal (BMO-T), National Bank of Canada (NA-T), Royal Bank of Canada (RY-T) and Toronto-Dominion Bank (TD-T)

Copper miners benefit from cease fire

RBC analyst Sam Crittenden outlined the global copper market,

“The U.S./Iran ceasefire and reopening of the strait has proven constructive for copper prices, now back above $6.20/lb, with equities rallying and WTI retreating to $80/bbl. For producers, two implications stand out. First, while Q2 cost inflation appears unavoidable, producers may escape the full 10-per-cent full-year cash cost increase, contingent on the durability of an uneasy peace. Second, normalizing sulphuric acid availability offers another cost tailwind; acid is essential for copper oxide processing (15 per cent of global supply), prices have surged fivefold over the past year, and the strait’s reopening should catalyze a sharp correction. Capstone is the clearest beneficiary given its oxide-heavy production profile (10 per cent of output), while Ivanhoe sits at the opposite end as a net acid seller. Downstream, the acid supply shock has depressed TC/RC charges to a record low of -$123/tonne, given smelters have compensated through acid by-product revenues of $222/tonne (Mining.com). While May Chinese copper imports softened (year-to-date down 7 per cent year-over-year), declining Shanghai inventories suggest underlying consumption remains resilient. The key takeaway is that geopolitical relief is providing a simultaneous tailwind to both copper prices and producer costs, although it could alleviate concerns around supply disruptions due to sulfur shortages”

Global fund manager survey

BofA Securities investment strategist Michael Hartnett describes fund managers as “frozenly bullish” as he interprets BofA’s monthly fund manager survey (FMS),

“FMS investors are steadfastly bullish (BofA Bull & Bear Indicator up to ‘sell signal’ 8.9), albeit a tad less bullish than in May (cash level up to 4.1 per cent from 3.9 per cent); the history of FMS suggests this is not a ‘big top’ for risk assets (will be signaled by bonds & voters), but traders take summer chips off table, consumer stocks best contrarian play for ‘peace’. On Macro & Fed: global growth & profit optimism at 3-month highs, but optimism on macro not off-the-charts; note expectations for interest rates now highest since Sep’22; on the Fed, 40 per cent (was 16 per cent) forecast hikes in next 12 months, and 55 per cent expect ‘hawkish hold’ from Warsh at tomorrow’s FOMC vs. 33 per cent predicting ‘dovish hold’. On Risks & Crowds: biggest tail risks seen as ‘2nd wave inflation’ (34 per cent) and ‘AI bubble’ (28 per cent), most crowded trade ‘long global semiconductors’ (80 per cent = all-time FMS high); asked what stage of investment cycle AI stocks currently in, 56 per cent say ‘boom’ (i.e. FOMO = more buyers) vs. 21 per cent say ‘euphoria’ (price/value in danger zone).

“On Asset Allocation & Contrarian Trades: investors trimmed global equity OW from 50 per cent to 38 per cent, tech OW from 33 per cent to 26 per cent, cut Europe stocks to biggest UW since Dec’24, bought Japan, materials & banks, now running smallest UW in US dollar since Mar’25; gold now seen as fairly valued 1st time since Feb’24; June FMS contrarian trades are long bonds, Europe, consumer, REITs, and short commodities, semis, materials, banks.”

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