Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank REIT analyst Mario Saric found a much better mood at Scotia’s annual REIT conference,
“Attendance materially higher for our Breakfast Broker Outlook & Property Tour. Last year, investor focus = converting SSNOI [same-store net operating income] growth into FFOPU [funds from operations per unit] growth (given higher debt costs). This year, we think focus transitioned to NAV validation via private deal flow and SSNOI growth sustainability. Much moreso than prior year, market rent trends were very topical, as was identifying potential equity issuers. Importantly, Corporate and Investor sentiment was markedly improved, both y/y and vs. last 6 months. Last year, we remarked that 2024 could still be a good year for CAD REITs, but some patience is required. While we’re likely post the Halftime show re: recovery, we still see 10%+ NTM [next twelve months] total returns in a “soft landing”.
“Our top picks and estimates are intact. Our Top Growth Picks = CAR, CSH, CIGI, IIP, GRT. Top Value Picks = AP, DIR, HOM, IIP, SVI. Top Income Picks = AP, CRR, CHP, SIA. Recent rating change (upgraded HOM to SO [sector outperform]).”
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Wells Fargo strategist Christopher Harvey does not expect market fireworks this afternoon,
“The 50bp-vs-25bp argument highlights the uncertainty surrounding the Fed’s path. The Fed needs to provide more certain communication on forward guidance so individuals and firms can better plan their investing, purchasing, and balance sheet. If not, they risk needing to add excess accommodation later in the cycle as uncertainty weighs on activity. The Fed has had ample opportunity to evaluate inflation and employment trends; it’s time to be more definitive. Afternoon Fireworks Unlikely. Per Bloomberg, futures imply a 66% chance of 50bps and 34% of 25bps. In other words, neither outcome would be a radical surprise. Also, based on a review of the starts of the last six easing cycles, only the unexpected 50bp easings of Jan 2001 (SPX +5.0%) and Sep 2007 (SPX +2.9%) resulted in a meaningful 1-day index move”
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The Research Investment Committee (RIC) at BofA Securities is tilting pessimistic,
“Until the data improve or the Fed panics, we are tactically more cautious. Move up in quality via stocks with high free cash flow, defensive sectors, Treasury bonds, AAA CLOs.
Stocks are priced for joy. The 1st Fed cut is bullish in a soft landing, but bearish if “hard”; either way, households will likely leave their $18tn in cash. ETFs say the hype cycle for AI is ending. And now corporate CFOs, lower-income consumers, private sector hiring, and commodity & bond markets all hint at a tougher road ahead … The 2025 risk: rate cuts hasten inflation and the 5% world. The shift from a 2% to 5% world rolls on, amid reversals in globalization, demographics, tech disruption and debt; all made more urgent by key swing state voters, the populist 20%. Secular longs are value vs growth, real vs digital sectors, credit, commodities.
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Diversion: “A Common Diabetes Drug Could Be a Fountain of Youth for Our Brains” – Gizmodo