BMO analyst assesses election implications for the yield-heavy energy infrastructure sector

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

BMO analyst Ben Pham assessed the election implications for the energy infrastructure sector,

“(i) Pipelines a mixed outcome. The Liberal government’s platform highlights the importance of energy infrastructure, but a Conservative win would have been a more favorable outcome for pipelines and conventional energy with repeal of anti-development legislation, fast-tracking of LNG export projects, and removal of emissions caps on Canadian O&G production. Our midstream companies have various degrees of exposure to Canada: highest is GEI/KEY at ~70% and least is SOBO at ~25%. (ii) Utility neutral. General support for clean electricity, digital infrastructure, and broader electrification should support continued Cdn. rate base growth, but we do not expect any significant revisions to the growth outlook. H has 100% earnings in Canada, ACO.X/CU 76%/93%, FTS 34%, and EMA 19%. (iii) Renewables positive. Renewable development will continue to benefit from six ITCs [tax credits] (up to 30%) which could spur new renewables project announcements. Companies in our coverage that are advancing notable projects w/ ITCs include BLX (battery storage & wind), CU ($4.5-5B Hydrogen project and AB renewables), CPX (battery storage), and NPI (battery storage and AB renewables)”

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Morgan Stanley global director of research selected a group of analyst charts to feature in a single Tuesday research report. The most actionable of the charts concerned GLP-1 treatments, like Ozempic,

“Our global Healthcare team believes we are now at an inflection point for GLP-1 use, which should extend beyond the largely US-based cohort of early adopters to larger numbers of patients globally. They project a peak obesity TAM of ~US$150bn in their base case, a meaningful increase from their previous estimate of ~US$105bn. New in this year’s survey, results from lapsed GLP-1 users (the majority of whom stopped due to side effects and cost) suggest at least partial reversion to prior food consumption habits, with half of them reporting weight gain”

“MS:Inflection point for GLP-1 drug treatments” – (Excerpt, charts) Bluesky

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Financial Times editor and author Rana Foroohar is worried about a “dollar doomsday”,

“I’d point to three fundamental issues, starting with an over-reliance on asset price-driven economic growth. Nearly all major US economic decisions of the past half-century have been about bolstering asset prices — from interest rate deregulation in the late 1970s to the legalisation of share buybacks to tax-favoured ‘performance pay’ in shares, which created Silicon Valley’s massive paper wealth. Trump and his aides talk about how Main Street doesn’t care about stock prices. But the fact that asset price growth has so wildly outstripped income growth means we are all more reliant on capital markets … I’m not necessarily predicting that a corporate debt or crypto-fuelled liquidity crunch will take down the US economy — although I wouldn’t be surprised if the next financial crisis came from those areas. Rather, my point is that you don’t have to believe that a trade war is imminent to see that American asset markets are increasingly risky and still overpriced. Add to this the trust deficit created by Trump, and I’d say the dollar doomsday scenario still has room to run”.

“The spectre of dollar doomsday still looms” – Financial Times (paywall)

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Bluesky post of the day:

Diversion: “Who is rising and falling in status?” – Marginal Revolution