Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC analyst Sumayya Syed sees the potential for a New York-style sharp rally in Toronto office rents,
“Historically, Manhattan vacancy has tracked that of major Canadian markets. In 2024, the trend diverged, as Manhattan hit an inflection point at 20% availability and saw vacancy decline by 150bps. Canadian cities, on the other hand, continued to see availability increase in 2024, led by Toronto. We believe we are at an inflection point in Toronto … Toronto’s recovery has been held back by an influx of supply. Since 2018, Manhattan square footage grew by only ~3.5%, and Toronto by ~10% … . If mean reversion were to hold, we would expect significant Canadian multiple expansion of up to ~3x. While our base case suggests it could take five years to get Toronto vacancy down to 10%, we do not need to hit 90% occupancy for stocks to inflect.”
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Also in real estate, Scotiabank analyst Mario Maric surveyed recent rental price data,
“Yesterday’s Rentals.ca March data showed 1.6% M/M growth in 2-BR asking rents vs. 0.3% erosion in February and +0.3% 3-month avg. (Exhibit 4); avg. 1BR was +0.8% vs. -0.5% in February (Exhibit 5). Regional discrepancies were more pronounced in March, ranging from 4.5% erosion in Toronto (3%-4% in Toronto-West) to +2% in Halifax, resulting in KMP and CAR looking the best and worst, respectively (Exhibit 1). Overall, it appears to be another month with national rents not falling, which is a decent data point heading into the seasonally strong Spring leasing season … Our SO-rated Apartments = IIP and CAR (IIP = more beta and catalyst-specific), while KMP is our top “defensive” Apartment pick (partly due to oil pressure) … We think select Apartment REITs can outperform CAD REITs (and TSX) in a recession”
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BMO chief strategist Brian Belski slashed his 2025 target for the S&P/TSX Composite but that was before the announcement of a 90-day tariff delay,
“We are revising our 2025 Year-End S&P/TSX price target down to 26,500 from 28,500 (-7%). Our resounding theme for Canada the past 13 years has been, “as America goes so Goes Canada”. To be blunt, this mantra works in both directions. As such, consistent with our revised S&P 500 price target, we are adjusting our S&P/TSX targets to be aligned with our longstanding relationship, largest trading partner, and southern neighbour. Stated succinctly, our view on Canada has NOT changed. Canadian stocks have clearly demonstrated their wherewithal so far in 2025. Canada’s strong relative value position, improving equity flows, and broadening performance continue to support Canada on a relative basis – especially during the ongoing rhetoric and fear-driven malaise relative to the US. Our newly revised price target still implies a near 20% return by year-end, which is still well within historical norms – and positions Canada to significantly outperform the US on a year-over-year basis. In fact, the TSX has posted returns greater than 20% from March to December in 19% of the years since 1919. Furthermore, when the first three months of the year post negative returns, the TSX has rebounded greater than 20% over the remaining nine months in 32% of those periods. Overall, Patience, Calm, and Perspective remain core to our discipline. As such, we strongly caution investors whose portfolios include a North American slant to NOT abandon US equities at current levels. Objectively and historically, US stocks outperform Canada over multiple years and decades”
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Bluesky post of the day:
The problem with most machine-based random number generators is that they’re not TRULY random, so if you need genuine randomness it is sometimes necessary to link your code to an external random process like a physical noise source or the current rate of US tariffs on a given country.
— Katie Mack (@astrokatie.com) April 9, 2025 at 3:15 PM
Diversion: “Revolt brews against RFK Jr. as experts pen rally cries in top medical journal” – Ars Technica (soft paywall)