Barlow’s Research Roundup: Bank analyst warns investors to be selective, recommends these stocks

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

Volatile H2 for banks

BMO bank analyst Sohrab Movahedi summarizes the first half of the year and warns investors of the need to be selective within the sector,

“In the first half of calendar 2026, the Canadian bank index delivered a positive total return of 31.7 per cent, outperforming the S&P/TSX composite by 2,050bps. Our historical data-mining exercise suggests about a 96-per-cent likelihood the bank index will also outperform the S&P/TSX composite on a full calendar year basis. We reiterate our constructive near-term outlook for Canadian banks (link to our increasing target prices note), supported by strong earnings momentum, a favourable revenue backdrop, and continued capital flexibility. However, higher valuations may also increase share price sensitivity to negative developments, reinforcing our stance of greater selectivity, with a focus on earnings durability and ROE visibility relative to valuation. Outperform-rated names remain RY, TD, NA, and CM, with BNS at Market Perform”.

Top U.S. trade ideas

BofA Securities analysts led by Anthony Cassamassino presented their top 10 U.S. equity ideas for the third quarter of 2026,

“We present our new list of ten short-term stock recommendations among US stocks under coverage based on our view that these stocks could have significant market and business-related catalysts in the quarter ahead. For 3Q26, our Top 10 Ideas include nine Buys and one Underperform across ten sub-sectors. Our Buys are Ford Motor, IBM, Ionis Pharma, JPMorgan Chase, Knight-Swift, Snowflake, Spotify, Visa Inc, and Walmart. Our Underperform is Lennar Corp … BofA’s RIC Outlook points to a largely bullish backdrop for the U.S. economy and global equities, with indicators confirming the “new industrial cycle” remains intact and earnings momentum strengthening. The Global Earnings Revision Ratio has improved to a six‑month high, with particularly strong readings in the U.S. and broad-based upgrades across regions, while the Global Wave of macro data is rising in tandem with the earnings cycle — historically a supportive signal for equity returns. Although valuations and positioning suggest markets may be somewhat overheated in the near term, we think any summer pullback could be a potential buying opportunity, especially in real assets, credit, and value-oriented areas..

Top picks in energy

RBC Capital Markets head of global energy research Greg Pardy is satisfied with his list of top global energy stocks,

“In June, the RBC Global Energy Best Ideas List was down 4.2 per cent sequentially compared to the iShares S&P Global Energy Sector ETF (IXC), which was down 6.5 per cent and a hybrid benchmark (75 per cent IXC,25 per cent JXI – iShares Global Utilities ETF) that was down 4.3 per cent on a sequential basis. This month, there are no additions to/removals from the RBC Global Energy Best Ideas List”.

The stocks on the list are Suncor Energy, California Resources, Chord Energy Corporation, ConocoPhillips, Permian Resources, PrairieSky Royalty, Canadian Natural Resources, Ovintiv Inc., Woodside Energy, Enerflex Ltd., AltaGas Ltd., Pembina Pipeline Corporation, Cheniere Energy Inc., Williams Companies, Inc., EDP Renováveis SA and Northland Power.

Weak outlook for Canada

In a separate BofA Securities report, Latin American and Canada economist Carlos Capistran published a bearish outlook on the Canadian economy,

“Canada is in a technical recession, with GDP contracting in late 2025 and early 2026 amid weaker trade and subdued investment. We expect growth to slow to 0.6 per cent in 2026 from 1.5 per cent in 2025, before recovering to 1.5 per cent in 2027. Consumption and inventories have provided some support, with a temporary boost from the 2026 FIFA World Cup, but investment and labor markets remain soft. Risks are balanced between support from higher oil prices and fiscal expansion, and headwinds from USMCA uncertainty and higher U.S. interest rates … Canada faces elevated uncertainty ahead of the USMCA review. While Canada and Mexico favor an extension, our baseline is that none will be agreed on July 1. USMCA would remain in force but move to annual reviews and expire in 2036 unless extended. Meanwhile, tariffs on autos, steel, and aluminum are likely to remain, keeping trade uncertainty high and weighing on investment … We expect the Bank of Canada to hold its policy rate at 2.25 per cent through 2026, at the lower end of its neutral range, as the economy remains in a technical recession. Weak activity and a persistent negative output gap should help contain inflation, keeping the bar for rate hikes high. Although our baseline includes three Fed hikes in 2026—posing upside risks to our BoC call—the divergence in business cycles, with the US in a boom and Canada in a downturn, supports different policy paths. As a result, the BoC is likely to stay on hold even if the Fed tightens, which could lead to a weaker Canadian dollar”.

Bluesky post of the day

Diversion

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