Scotiabank analyst’s top pick in apartment REITs

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

Rent news ‘less bad’

Scotiabank analyst Mario Saric provided an update on the apartment REIT sector,

“Monday’s Rentals.ca December data was ‘less’ bad month-over-month and year-over-year. Avg. 2BR asking rents fell 0.6 per cent month-over-month (vs. 1.8 per cent November), driving the 3-month avg. to 0.7 per cent ; avg. 1BR fell 0.7 per cent vs. 1.4 per cent November. National Apartment Rent fell 0.5 per cent m/m vs. 1.2 per cent November, with 3-month avg. at down 0.7 per cent . Last December, rents fell a more significant 2.6 per cent m/m … BEI benefited from 1BR m/m growth in Edmonton and Montreal. Halifax was OK (better than Ottawa, Toronto or Vancouver). Net-net, the data update appears to relatively favour BEI (December = KMP), consistent with BEI implied cap outperformance in the past month (-31bp vs. -22bp avg. for CAR/KMP;). Our ‘Neutral’ view reflects the seasonally slow Q4 and Q1, before heading into the all-important Spring leasing season. As discussed in our Minto Privatization note, clients asking ‘Who is next?’ on M&A may support a 1H/26 Apartment REIT sentiment recovery, as opposed to 2H/26. Post MI, Apartment REITs are up 6 per cent on avg. vs. up 5 per cent for Sector, with the 1 per cent outperformance lagging the 3.5 per cent six days post IIP news in May. Our only SO [’sector outperform’] rating = KMP-T [Killam Apartment REIT], John Smith says.”

Fed independence risk partially priced in

BofA Securities rates strategist Meghan Swiber explained why markets did not freak out about White House threats to the Federal Reserve,

“A new round of Fed independence concerns has been triggered by the DoJ (Department of Justice) criminal investigation related to Chair Powell’s testimony about Fed building renovations. Market response was relatively muted on net, with UST curve modestly bear steepening [longer-term bond yields climbing] & USD weaker by about 0.3 per cent. This is largely consistent with a market that mostly sees Fed independence risks as either well priced or overpriced. The news has also reduced Polymarket’s probability of Powell leaving the Fed Board by year end and we think may galvanize hawks on the FOMC. This may also help explain limited market response on headlines. We remain positioned for a steeper UST curve, long 10y breakeven inflation, and long belly [mid-term] nominal & real rates. Our latest FX and Rates Sentiment Survey suggests that the place we should see greatest market response to Fed independence risk is a weaker USD, steeper UST curve and higher US breakeven inflation (BEI). This is largely consistent with price action following July 16 media reports’ headlines that Trump would be firing Powell and recent market response on latest headlines”.

Silver to outperform gold

Citi analyst Kenny Hu predicts that silver will outperform gold,

“We upgrade our very near-term price forecasts for the precious metal complex as we expect the bull market to stay intact in the near term amid heightened geopolitical risks (Russia/Ukraine, Iran, Greenland, Venezuela, etc), ongoing physical market shortages (in silver and PGMs [platinum group of metals] in particular, subject to an ongoing lack of clarity on the critical minerals section 232), and renewed uncertainty on Fed independence (recent DOJ subpoena of the Fed - Bloomberg, Jan 12). Our base case 0-3m target is now $5,000/oz for gold, and $100/oz for silver. We continue to highlight the binary risks of the upcoming Critical Minerals Section 232 tariff decisions…. Though gold has just reached new record highs, rising by 7 per cent and 12 per cent over the past 1 month and 3 months, respectively, our longstanding call for silver to outperform and for the precious metals bull market to broaden into industrial metals and for industrial metals to take centre stage over the same periods has worked well with copper up 15 per cent and up 26 per cent, aluminium up 10 per cent and up 15 per cent, silver up 36 per cent and up 60 per cent, over the same time periods”

Bluesky post of the day

Diversion

“People Who Go Off GLP-1s Are Experiencing a Sudden and Terrible Hunger” - Futurism