Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
TD Cowen real estate analyst Sam Damiani detailed improving market conditions in the REIT sector and presented his top picks,
“We believe the InterRent takeover announced in May and news of a potential takeover of H&R signal a recovery in the transaction market …The most recent monthly money market and term deposit funds flow data were among the most favourable since 2022 for yield-oriented equities including REITs … Rising bond yields being offset by tighter spreads. The 10-year GoC is ~+40bps since Q1 reporting to over 3.5% - the highest since May 2024. Offsetting this has been a 10bps tightening in unsecured spreads. We do not expect material changes in finance cost assumptions. Our updated real estate sector pecking order: 1 Retail (strong leasing momentum and relative valuations still down post-HBC); 2 Seniors Housing (up one notch on elevated NOI [ net operating income] growth seen extending into 2027); 3 Residential (down one notch on post-IIP valuation bumps) … Top picks: Larger-cap: REI, BEI, FCR, SIA, HR. Smaller-cap: DRM, HOM, MI”
Mr. Damiani’s research report is entitled “AFFO Growth Moderating But Set to Rebound in 2026”, underscoring his optimism next year.
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Scotiabank analyst Robert Hope is increasingly bullish on his pipelines and utilities sectors,
“Tailwinds for the power space continue to multiply, and we expect the group will continue to see strong share price returns in Q3 as additional catalysts are realized. To reflect this, we are upgrading TA-T to Sector Outperform as we see it well positioned to benefit from power demand growth in Alberta. In parallel, we are moving BLX-T to Sector Perform given recent share price returns and fewer relative catalysts. Looking to Q2/25, on balance, our estimates are slightly above consensus. We are generally above consensus for the pipeline and utility group and below for the midstream group. We prefer the power names followed by the gas-levered pipeline/midstream names and then the utility group. Our overall favourite names are ALA-T, BIP-N, CPX-T, KEY-T, and TA-T”
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BMO analyst David Cheng published a report on ETF sector rankings,
“Our quant strategy uses a two -layer approach to predict changes in ETF IR [information ratio] … We have been observing some softness in previously outperforming defensive sectors like staples and utilities. As a result, the weights of staples (XST, - 1.6%) and utilities (ZUT, -1.3%) were slightly trimmed. On the other hand, the weight of financials (XFN) was increased to 26.9% with an intact risk -adjusted returns profile, while industrials (ZIN, +1.6%) saw improving information ratio metrics with widening breadth . Finally, the weights of materials (ZMT, +3.6%) and gold (ZGD, -3.6%) were redistributed, while the weight of energy was also reduced (ZEO, -5.6%)”
“ETF sector ranking snapshot from BMO” – (table) Bluesky
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BMO senior economist Robert Kavcic is tracking the effects of AI on the domestic job market,
“This week’s Focus Feature will explore some of the disruptions currently hitting the Canadian job market. Things like the trade war, a leaner federal government, high youth unemployment and the proliferation of AI. Here’s a look at the latter. Since AI really began to proliferate in 2022, job performance in occupations with high exposure and low complementarity (i.e., AI could replace a worker rather than be used by them) have indeed underperformed. On the flip side, performance in highly-exposed occupations which have an apparent ability to harness AI, have actually outperformed the broad labour market by a solid margin. We don’t want to read too much into this, given the short sample period and full awareness that broader macroeconomic forces have likely been playing the biggest role. But, it’s probably safe to say that, like past advancements, AI will hurt some areas of the job market, help others, and ultimately reshape the employment landscape…again”
“BMO: “Has AI Landed in Canada’s Job Market?”” – (research excerpt, chart) Bluesky
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Bluesky post of the day:
https://bsky.app/profile/mikepmoffatt.bsky.social/post/3lu647itdnz2h
Diversion: “The 10cm Super-Rice That Could Feed the First Lunar Colony” - SciTechDaily