Tax loss selling candidates, and potential replacement stocks, from Scotiabank strategists

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

Buying opportunities

Scotiabank analysts presented their “sector outperform”-rated tax loss selling candidates and a potential replacement stock to maintain exposure to their respective sectors.

The selling candidates are West Fraser Timber (Nutrien Ltd. is the potential replacement), Methanex (Nutrien again), Descartes Systems Group (Kinaxis Inc.), Cargojet (CAE Inc.), Ivanhoe Mines (Capstone Mining Corp), MDA Space (CAE Inc.), Air Canada (CAE Inc.), FirstService (Colliers International Group Inc.), Canadian National Railway (Waste Connections Inc.), Alimentation Couche-Tard (Metro Inc.), Brookfield Asset Management (Brookfield Corp), Capital Power (Transalta Inc.), Ovintiv (Whitecap Resources Inc.), and Canadian Pacific Kansas City (Waste Connections Inc.).

Outlook

BofA Securities chief U.S. equity strategist Savita Subramanian published her outlook for 2026 titled All bulled up and no place to go,

“Multiple expansion and earnings growth both pushed the S&P 500 up 15 per cent this year. In 2026, earnings will do the lift (we forecast 14-per-cent growth, or $310) with about 10pt PE contraction. 7100 implies 5-per-cent price return. In 2025, policy uncertainty stymied broadening and guidance remained muted. But from here, bonus depreciation should pull forward capex, corporate guidance is 2 to 1 bullish and sentiment is far from euphoric. Liquidity is full blast today, but the direction of travel is likely less not more - less buybacks, more capex, less central bank cuts than last year and a Fed cutting only if growth is weak. The bear/bull range for the S&P is 5500 (20-per-cent drop typical of a recession) to 8500 (25 per cent higher, in line with a big EPS beat). We raise Staples to OW from UW and lower Discretionary to UW from MW. We remain OW Financials, Real Estate, Materials, Health Care & Energy, UW Comm. Services and Utilities … AI air pocket ahead, but this isn’t 2000. Breadth and lofty multiples rhyme with 2000 as the S&P trades above Tech Bubble multiple on 9 of the 20 metrics we track. But recommended stock allocations are much lower than in 2000, earnings growth has supported, IPOs are smaller, speculation in unprofitable stocks is less extreme”

U.S. concerns?

Investors looking for reasons to worry about U.S. markets should check out their chart presented by BMO senior economist Sal Guatieri,

“Total capitalization of S&P 500 companies hit a record 172 per cent of U.S. nominal GDP in Q2, and a rough estimate would place it above 190 per cent today. For technicians, that’s more than double the historical average of 68 per cent since 1964. While the increasingly global nature of U.S. corporate earnings adds some upward drift to this ratio, there’s little doubt that valuations are getting stretched. Now, it’s possible that the AI-led companies driving most of the market gains will also propel profits and the economy to new heights in the future, bringing valuations back down to earth. But if not, the adjustment may need to come through prices, as occurred at the start of the century”

“BMO: Capped out?” – (research excerpt, chart) Bluesky

Bluesky post of the day

Diversion

“11,000-Year-Old Dog Skulls Rewrite the Story of Domestication” - SciTechDaily