Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets analyst Pammi Bir is optimistic about REITs for the second half of the year,
“A tough first half. The TSX REIT Index posted a -6% total return in Q2/24, extending its slide to -7% in 1H, well behind the TSX Composite (+6%) and S&P 500 (+15%). Relative to other listed real estate markets, Canadian REITs underperformed global REITs (-3% YTD), including Asia (+5%), US (flat), & Europe (-2%) … Given the current macro setup, we’re hard-pressed to shift our bias away from subsectors we expect to exhibit superior earnings resilience. Underpinned by robust organic growth, we expect seniors housing (+10% 2023A-25E FFOPU CAGR), Canadian-weighted multi-family (+8%), industrial (+5%), and self-storage (+5%) to lead the group, well ahead of the broader sector average (+2%) … we believe the sector remains capable of a stronger 2H/24. To get there, we’ll likely need some tailwinds from lower rates. Yet even absent this, we believe our unchanged line up of top picks (AP [Allied Properties REIT], BEI [Boardwalk REIT], CAR [Canadian apartment Properties REIT], CIGI [Colliers International Group Inc.], CSH [Chartwell Retirement Residences], DIR [Dream industrial REIT], FCR [First Capital REIT], FSV [Firstservice Corp.], GRT [Granite REIT], HOM [BSR REIT], IIP [Interrent REIT], KMP [Killam Apartment REIT], MHC [Middlefield Healthcare Dividend ETF], MI [Minto Apartment REIT], MRG [Morguard North American Residential REIT], REI [Riocan REIT], SRU [Smartcentres REIT], SVI [Storagevault] is well-placed to deliver superior earnings growth given the weighting in our preferred subsectors”
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BMO senior economist Robert Kavcic noted the lack of relief in the housing market,
“Those hoping for a post-BoC rebound in Canadian housing are still disappointed, with June sales results from the major cities proving to be another letdown. Sales in Toronto were down 16% y/y, Vancouver was down 19% y/y and even Calgary was down 13% y/y. In Toronto and Vancouver, new listings were up meaningfully from a year ago (+12% and +7%). More notably, active listings in the two largest cities are plentiful with those in Toronto up 67% y/y, and those in Vancouver now 20% above the 10-year average. Even TRREB went so far as to say that “the GTA housing market is currently well-supplied”. Wait, what? This is consistent with our view that early BoC easing won’t have a big impact on housing given that a 25 bp cut to variable mortgage rates offers no real relief when buyers are already mostly operating in the (lower) 3- and 5-year fixed markets. It will probably take further easing and some further price declines (in some segments) to get the market moving again”
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BofA Securities investment strategist Michael Hartnett discussed the potential market fallout from the U.S. presidential debate,
“Shift in US election probabilities pre- and post-debate…Trump/split Congress down from 41% to 39%, Trump sweep up from 25% to 36%, Biden/split Congress down from 26% to 8%, Harris/split Congress 0% to 13%, Biden/Harris sweep down from 8% to 4% … main price-action past week as Trump sweep probability increased…winners = rates vol, yield curve steepeners, banks, tech; losers = 30-year UST, homebuilders, renewables, EM currencies … note that past election “surprises”/“sweeps” caused 20-40bps yield curve steepening in 4 weeks (Trump ‘16, Biden ‘20, Truss ‘22, Le Pen ‘24) … Flows to Know: Cash: largest inflow in two months ($51.9bn) … Gold: largest inflow since Mar’24 ($1.0bn) and biggest 2-week inflow since Apr’22 … Bonds: largest inflow since Feb’21 ($19.0bn )…investors locking in “peak yields …Equities: 11th week of inflows ($8.1bn), longest streak since Dec’21 "
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Diversion: “Today’s big stars aren’t as big as the big stars of the past. Here’s statistical proof” – A Journal of Musical Things