Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Hugo Ste-Marie identifies 10 themes that will determine the investment landscape in 2025,
“1. It all comes down to a synchronized easing cycle. 2. Abundant liquidity looking for a home. 3. U.S. equities: uptrend extends, but diversification needed. 4. Size trade: Will U.S. small caps hit a home run or grand slam? 5. Canadian equities: Banking on Financials. 6. International equities: A land of broken dreams. 7. Commodities: The shine is fading. 8. Bond market - 2024 Redux. 9. Factors to own in 2025 - Size in the U.S. and Dividend in Canada. 10. Factors to avoid in 2025 - U.S. Pure Growth … In Canada, dividend strategies should enjoy tailwinds. Our Total Yield factor (dividend yield + net buyback yield) tends to outperform as well at times of positive growth surprises (this mostly comes from resource non-payer names underperforming). Still, we would focus on a different macro exposure to explain our preference for yield. In Canada, the BoC is likely to go for deeper rate cuts than in the U.S., which should bring back investor preferences from cash (yielding as high as 5% in May, now in the high 3%) back to income strategies (our SQoRE Canada Top 30 Dividend Payers currently yields 4.2%, with an additional net buyback yield of +1.0%).”
Unhelpfully, an updated list of top 30 dividend stocks was not provided, but Scotia’s daily Portfolio Strategy report had a link to the following list as recently as a week ago: Endeavour Mining PLC , B2Gold, Toronto-Dominion Bank, Magna, Quebecor, Whitecap Resources, iA Financial Corp, Suncor Energy, Imperial Oil, Bank of Nova Scotia, Atco, Great-West Lifeco, Manulife Financial, Empire, Canadian National Railway, Parkland, Gildan Activewear, BCE, Metro, CCL Industries, Open Text, CIBC, Canadian Tire, Canadian Utilities, Allied Properties REIT, Fortis, Hydro One, Canadian Natural Resources, Emera and TC Energy.
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The U.S. outlook 2025 reports keep coming out, few of them notable. One of the exceptions is Julian Emanuel from Evercore ISI,
“Exuberance is rising – but while 25x SPX TTM [trailing 12 months] P/E is lofty, Valuations are not extreme “enough” with the Fed cutting and the Economy strong, sentiment is not universally optimistic, and aggregate market cap of speculation hotspots is not large enough to mark a significant top. Rather, a ‘Trump Trade’ pause prior to 1/20 causes volatility/mild setback but SPX stays on course for 6,600 at midyear 2025 – 2021 and early 2018 “Exuberance corrections” the blueprint. New: Buy the SPY Feb 610 Straddle [hedge] to complement a portfolio skewed toward Tech and Small Caps. Buy stocks when volatility is high and options when volatility is low”.
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I don ‘t usually pay much attention to fund manager buying trends because they aren’t consistently right or wrong so offer little in the way of guidance.
However, Citi’s Alex Saunders uncovered some interesting trends, notably profit taking on Trump trades,
“We saw long-only managers reduce exposure in the past week, net selling Financials, Health Care, and Energy while adding exposure to Communications and Tech. Hedge funds had mixed flows with a slight lean towards buying. They bought Tech the most, while they sold Communications, Industrials, and Health Care The top three sectors this week were Tech, Consumer Staples, and Industrials while Financials, Consumer Discretionary, and Energy made up the bottom three. This week, we extend our market-implied regime framework to our regime clusters framework and find that market internals currently show “Recovery” and “Goldilocks” as the most correlated regimes. Recovery is positive for cyclicals and equities overall. Goldilocks is more conducive to tech outperformance”
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Diversion: “Formaldehyde Causes More Cancer Than Any Other Toxic Air Pollutant. Little Is Being Done to Curb the Risk” – Gizmodo