RBC analyst reveals his top picks in copper mining as commodity price hits new records

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

Fed showdown

The U.S. political clown show continued with subpoenas for Federal Reserve chairman Powell. Evercore ISI economist Krishna Guha discussed the implications,

“The simmering tension between the Trump administration and the Fed has blown sky high with Fed chair Powell revealing that the Trump Department of Justice has served the Fed with subpoenas threatening a criminal indictment over his testimony relating to building cost overruns and declaring that this is an effort to break Fed independence … The Fed chair said ‘the threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.’ … We are stunned by this deeply disturbing development which came out of the blue after a period in which tensions between Trump and the Fed seemed to be contained ... on the face of it, it looks as if the administration and the central bank are now in open war – something Powell and Treasury Secretary Bessent have tried strenuously to avoid … This is unambiguously risk off. We expect the dollar, bonds and stocks to all fall in Monday trading in a sell-America trade similar to that in April last year at the peak of the tariff shock and earlier threat to Powell’s position as Fed chair, with global investors applying a higher risk premium to US assets. Gold and other safe havens should rally. The severity of the response will shape what happens next, establish whether Fed independence still has a guarantor in the market, and influence whether Bessent or Republicans in Congress seek to broker an off-ramp”

Soaring copper

RBC Capital Markets mining analyst Sam Crittenden discusses the new record commodity prices for copper,

“Our view: Copper started the year with a bang, breaking through $6.00/lb as momentum continues from late 2025 due to numerous supply disruptions, elevated inventories in the US, and growing demand from new sources … We remain constructive on the outlook this year despite the nagging feeling of ‘it’s too far too fast’ which is likely causing the current consolidation. The copper stocks were up 68 per cent in 2025, outpacing the commodity which was up 43 per cent and equity valuations are now above historical levels at 1.2x NAVPS [net asset value per share], 7.5x NTM [next 12 months] EBITDA vs. 10Y average of 0.8x NAVPS and 5.7x NTM EBITDA; however, the implied price is $4.39/lb, a 26-per-cent discount to spot of $5.84/lb vs. the historical average discount of 10 per cent. We expect the focus with Q4 results to be on mine ramp-ups and potential sanction decisions this year as capital allocation shifts back towards production growth due to high prices, strong balance sheets, and several shovel ready projects … Preferred names: Hudbay as it continues to demonstrate strong FCF and de-risk Copper World, Capstone as we expect more consistent production in 2026, while we still see upside in First Quantum as it works towards a restart in Panama.”

TSX shines

BMO chief economist Doug Porter and senior economist Robert Kavcic detailed the remarkable past 24 months for the TSX in a column called TSX: The Golden Years,

“The 28.2-per-cent advance was the second best of the 21st century, topped only by 2009—and that year marked a rebound from a devastating fall in 2008, while last year’s gains built on solid increases in prior years. In fact, the 2024-25 combined gain of 51 per cent is the best two-year bull run for the TSX since 1979-1980 … even excluding the metals & mining component, the rest of the TSX still clocked a 19-per-cent gain last year, again topping the S&P 500’s 16.4-per-cent rise. So gold was the star of the show over the past year, but arguably the bigger story was the solid performance by the rest of the index in a challenging backdrop … the other big engine was heavyweight financials, which accounts for roughly one-third of the TSX market cap and jumped 30.8 per cent on the year … we were of the view a year ago that conditions were ripe for the TSX to turn the tables, as sour sentiment and relatively cheap valuations set the stage for a contrarian trade in Canadian equities … Ultimately, with the extreme valuation gap narrowed, the relative performance of the TSX will likely be driven by the same factor that typically decides the issue— commodity prices. We have long asserted that the fate of real commodity prices determines how the TSX will fare versus U.S. markets, and it tends to move in long waves … In the event that the AI trade unwinds, the broad TSX would likely provide a marginal cushion versus the S&P 500—for real safety, investors would need to lean on more specific defensive stock and sector selection”

“Focus: TSX – The Golden Years?” – BMO Economics

Bluesky post of the day

Diversion

“World’s Richest Man Says Don’t Bother Saving for Retirement” - Gizmodo

Editor’s note: A previous headline accompanying this article incorrectly referred to a Bank of Montreal analyst. It has been corrected to refer to the RBC Capital Markets analyst quoted in the article.