Scotiabank resumes coverage of domestic banks, provides top picks

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Scotiabank has resumed coverage of the domestic banks with analyst Mike Rizvanovic,

“Resilient in the Face of Uncertainty: Assuming Coverage of Six Canadian Banks. OUR TAKE: We have assumed coverage of the Canadian banks with a Sector Outperform rating on Royal Bank of Canada (RY), which is our top pick, Canadian Imperial Bank of Commerce (CM), and National Bank of Canada (NA), and Sector Perform ratings on Bank of Montreal (BMO), TD Bank Group (TD), and Laurentian Bank of Canada (LB). Despite elevated uncertainty in the macroeconomic outlook, with lingering risks of a potential trade war, we are generally constructive on the Canadian banks. We believe the group is as recession ready as it has ever been, with the market, in our view, not fully appreciating (1) that credit risk has become more manageable through successive cycles, backed by a sizable pre-provision, pre-tax (PPPT) earnings buffer; (2) that the regulatory capital regime is now structurally superior and much more robust; and (3) the countercyclical component of earnings through trading revenue.”

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BMO energy analyst Randy Ollenberger thinks the selloff in crude is overdone and reiterates his top picks,

“Crude oil prices and equity markets have had a tumultuous ride over the first half of 2025, buffeted by shifting U.S. policy and OPEC+’s surprise move to increase production. Despite the uncertain outlook, there is little evidence to-date of a material drop in crude oil demand. Global crude oil inventories are below normal and seasonal builds though the first quarter were in line with normal patterns. Petroleum product prices have also held, especially for gasoline, which has led to higher margins. Together these factors suggest that global oil demand could be more robust than consensus predictions. At the same time, lower oil prices are leading to lower non-OPEC oil production. Ultimately, we think crude oil prices will move back toward the global supply cost of roughly US$70/ bbl. In the meantime, significantly improved balance sheets and lower cost structures mean many companies can generate free cash at US$50 or lower.... Our top recommendations are Athabasca Oil, Canadian Natural Resources, Diamondback Energy, EQT, Expand Energy, Headwater, Ovintiv, Permian Resource, Peyto, Suncor, and Tamarack Valley.”

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BofA Securities’ monthly Research Investment Committee report uncovered a bullish signal in current markets,

“In the past 70 years, when the two longest-running soft data measures - ISM manufacturing PMI & the Conference Board consumer survey - weakened sharply but no recession followed, it was typically a great time to invest:

“U.S. equities rose 17% on average in the 12-months following a decline in sentiment outside of a recession, compared to 11% average all time returns since 1951;

“U.S. high yield and IG corporates outperformed US Treasuries by 3% on average when soft data stalled. Commodities also outperformed Treasuries by 1%;

“Equities can rally even without Fed cuts. In poor sentiment periods where the Fed hiked or maintained rates, U.S. equities averaged 14% the next 12 months.”

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Bluesky post of the day:

Diversion: “Human “Super Immunity” – Man Bitten by Snakes Over 100 Times Helps Create Revolutionary Antivenom” - SciTech Daily