Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets analyst Bish Koziol made four changes to the company’s QuaDS Score Top 40 List of domestic stock picks, adding Finning International Inc. (FTT-T) and Dundee Precious Metals Inc. (DPM-T) while removing Franco-Nevada Corp. (FNV-T) and Toronto-Dominion Bank (TD-T),
“Our Canada Overall Top 40 declined 0.6 per cent last month versus the S&P/TSX Composite loss of 1.4 per cent. Year-to-date the Portfolio has gained 9.9 per cent compared to the 6.9-per-cent gain of the S&P/TSX Composite. Gains in Energy and Information Technology in August were offset by declines in Financials, Consumer Staples, and Communication Services. Both additions this month realized improving Momentum scores. With the removal of TD this month, our Financials sector weighting was reduced to 27.5 per cent.”
The list as it stands includes Canadian Natural Resources, Imperial Oil, Pason Systems, Stella-Jones , Labrador Iron Ore Royalty, CCL Industries, Richelieu Hardware, Thomson Reuters, Toromont Industries, TFI International, Ritchie Brothers Auctioneers, Magna International, Metro inc., Loblaw Companies, North West Company, Great-West Lifeco, Intact Financial, IA Financial, Equitable Group Inc., TMX Group, National Bank of Canada, Bank of Nova Scotia, Bank of Montreal, CI Financial Corp., Fairfax Financial Holdings, Open text, Enghouse Systems, Celestica Inc., CGI Inc., Constellations Software, Quebecor, Rogers Communications, Cogeco Communications, BCE Inc., TransAlta Corp., Fortis, and FirstService Corp.
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Barclays strategist Ajay Rajadhyaksh is forecasting a ‘manageable slowdown’ for the global economy,
“A number of factors should now start to chip away at the U.S. growth story. At the margin, credit is tightening, credit card and auto delinquencies are rising, and the lagged effect of prior hikes will become a bigger drag as time passes … We see the world economy growing at 2.8 per cent in 2023 (identical to our forecast in the previous quarterly) and 2.3 per cent in 2024. This is admittedly uninspiring. But we do not think it is weak enough to spark a major pullback in risk assets. Not with the Fed almost done and inflation likely to drop steadily across most economies in coming months (even if the 2-per-cent goal remains distant)… Cash outperformed equities and fixed income in Q3, and we expect a repeat in Q4. Despite the re-pricing in core fixed income in recent months, bonds are not yet a compelling buy” .
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BMO economists continue to hammer away at the Canadian economy’s “dismal” productivity. This time it’s senior economist Sal Guatieri,
“Canada’s economy took another blow as the latest Q2 productivity data showed a fifth straight quarterly decline. The dismal trend (down 2.2 per cent year-over-year) has two important consequences. First, it’s pushing up unit labour costs, a key source of inflation stickiness. Costs are up 5.5 per cent year-over-year, despite a not-too-threatening 3.2-per-cent rise in hourly compensation. Second, it’s depressing living standards. As shown in the chart, it’s no coincidence that the stalling of Canada’s per capita real GDP growth in the past six years aligns with zero net gain in productivity since mid-2016. (Note that this relationship broke down in 2020 when low-wage/lowproductivity sectors suffered heavy job losses in the shutdowns.) For comparison, U.S. productivity (business sector) and per capita real GDP are both up 11 per cent since then. Moreover, growth in U.S. unit labour costs has slowed to 2.2 per cent year-over-year, with help from a 1.4-per-cent advance in productivity.”
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Diversion: “The room-temperature superconductor that wasn’t” – Ars Technica