Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO senior economist Robert Kavcic describes the domestic housing market outlook as “A Long Way Home”,
“The Canadian housing market should firm modestly this year, but it’s still a long way back to the 2022 highs … We don’t expect another exuberant takeoff. Nationally, we see sales volumes rising 12 per cent for the calendar year versus depressed prior-year levels. The benchmark home price looks to rise a modest 4 per cent, as still-challenging affordability and investment calculus will keep the rebound in check. Housing starts are poised to soften somewhat alongside weaker presale market conditions and a downturn in population growth, although the level remains robust. Regionally, we could see the significant outperformance of Alberta and Atlantic Canada step back, while more beaten-down markets in Southern Ontario and B.C. recover. That said, we expect meaningful performance discrepancy within the major cities, especially Toronto, depending on property type. Single-detached housing remains scarcely supplied and well bid by young families; yet the condo market is dealing with a flood of completions, much of which are investor-owned and will be flipped onto the resale market. Look for condo prices to struggle in 2025 even if the single-detached market improves further”
“Housing outlook: A Long Way Home” – BMO Economics
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CIBC foreign exchange analyst Sarah Ying sees further near-term weakness for the loonie,
“USD: While the USD has demonstrated remarkable strength in recent months, we expect that it has a little bit further to go as Trump takes office and tariff threats amplify. However, moving into the back half of the year, we expect the USD to begin to come off high levels as the Fed eases more than is currently priced and US growth converges with growth in other parts of the world. CAD: We expect USD/CAD to rally through H1 2025 towards 1.46, [US$0.6849] as Trump tariff rhetoric ramps up and central bank pricing moves in favour of a relatively more dovish BoC. We see a reversal in H2, as we expect tariff rhetoric to prove to be more bark than bite and as rate spreads move back in favour of a stronger CAD. We’ll note however, that given somewhat opaque and binary tariff risks, uncertainty around these forecasts are larger than usual”
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Morgan Stanley strategist Marina Zavolock uncovered investor interest in security and defence,
“Innovation, Security/Defence, and ‘Core beneficiaries of AI’ are the three most popular themes for retail investors into 2025, according to our survey: Security/Defence ranked highly in both the US, and – more surprisingly – Germany. When we asked about how shifting geopolitics has changed perception, German retail investors and younger people were most likely to choose a greater propensity to invest in Defence/Security. In Europe, our Top Pick in Defence is German-listed Rheinmetall. In the US, we prefer cybersecurity Top Pick Fortinet. Conversely, ESG and ‘weight loss’ ranked relatively lower in popularity … Our survey confirmed private markets penetration among retail investors is still low (1-4 per cent of wealth across surveyed countries). However, we found both investment behaviour in the last 12 month and forward intentions were far more skewed in the direction of private markets assets … Our preferred ways to play this are CVC and EQT in Europe and BX in the U.S.”
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In a separate CIBC report, economist Avery Shenfeld argued that retaliatory tariffs on U.S. goods are self-defeating,
“Canada’s retaliatory tariffs will hurt our own economy. There’s no Canadian orange juice industry to benefit from tariffs on Florida juice … The problem is that Trump likely understands that, in a bilateral tariff war, this is gonna hurt us more than it hurts him. Yes, we’re an important export market for many U.S. industries. But as a share of GDP, only one U.S. state is more dependent on exports to Canada than the least-U.S.-dependant Canadian province”
“Gonna hurt you more than it hurts me” – CIBC Economics
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Diversion: “These Bizarre Theories About the L.A. Wildfires Endanger Everyone’ – The Atlantic