Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
TD Cowen real estate analyst Sam Damiani discussed the threat of tariffs and how it affects REITs,
“The threat of tariffs is already causing some businesses to pause decisions around growth plans and capital investment. Impacts will be felt more broadly across real estate subsectors if tariffs are confirmed and remain in place for the long-term. These include the expected reduction in GDP as well as employment levels …Valuations are likely to be affected more immediately. Any prospect of slowing demand and NOI growth would likely cause the pace of transaction volumes to lose speed and place upward pressure on cap rates … Financial support measures for the most affected businesses and workers are already being contemplated by government … Energy infrastructure projects could see greater support (or fewer roadblocks) after Canada’s expected federal election later this year, which we believe could boost the economies of Alberta and Saskatchewan in particular. Names in our coverage with higher AB/SK exposure include BEI, PMZ, NXR, CHP, CRR, and DRM … Names across our coverage that would benefit from a stronger USD (i.e., value of their US properties in CAD) include: GRT, HR, AX, MRG, HOM, and DRR”
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BMO senior economist Robert Kavcic quantifies the now-tariffed domestic aluminum and steel industries,
“With steel and aluminum tariffs now in focus, here are some details for Canada. Total steel and aluminum exports to the U.S. were $35 billion in the past year, or roughly 1% of GDP. Note that tariff coverage might vary, as in 2018. During that episode, StatCan reported that tariffs covered $16.7 bln versus total category exports of around $25 billion. At any rate, we can drill further and look at where steel and aluminum U.S. export exposure is greatest across the country and, no surprise, that is Quebec and Ontario. Quebec exported roughly $14 bln of such product to the U.S. in the past year (mostly aluminum), or just under 2.5% of GDP; while Ontario’s slightly larger dollar amount weighed in at just under 1.5% of GDP (mostly steel). The direct exposure across the rest of Canada is less pronounced”
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Morgan Stanley Wealth Management CIO Lisa Shalett identifies some wobbling among the Magnificent Seven,
“The 100 largest stocks in the S&P 500 are exhibiting upward earnings surprises at a much a lower rate than the next 400 and a one-day-post-earnings-release price move of -50 basis points, on average. Anxiety has continued to build around Magnificent Seven (Mag 7) generati artificial intelligence (GenAI)-related capex spending and t extent to which players appear engaged in a multiyear race for dominance. Amid this development, Mag 7 earnings growth rates have been decelerating and are poised to continue to do so, converging with those expected from “the 493” … In January, as illustrated in Chart of the Week, the tech sector underperformed the S&P 500 Index by the widest margin since 2016. Furthermore, prices of four of the Mag 7 stocks have broken below their 50-day moving averages, while hedge funds are increasingly reducing gross exposure for the first time in a year. Insiders have been selli at a rate not seen since the fourth quarter of 2021—the period preceding the latest bear market—raising questions about earnings achievability and valuations. And what’s leading the markets is telling: financials, health care, midc growth, European stocks and gold!
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Diversion: “Flu Cases Are Surging—Here’s Why This Season Is So Unusual” – Gizmodo