Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Jean-Michel Gauthier is touting dividend strategies and provides options for investors,
“The difference between cash yield and S&P 500 dividend yield has shrunk from 4% (i.e. cash was yielding 4% above the S&P 500 dividend yield) as recently as June to 3.4% in October, with further drops expected as the Fed eases further. Likewise in Canada, the gap has shrunk from +2.3% in favour of cash towards only +0.8%. With cash return falling, dividend paying companies are starting to look attractive again … flows into Dividend strategies ETFs have picked up dramatically over the summer (highest since 2022) just as flows into Growth/Momentum/Quality have slowed visibly … A simple factor of being long the highest yielding dividend payers while shorting those with the lowest yield (or no div. yield) has typically outperformed over the long run. Still, Technology’s dominance since 2010 has definitely limited outperformance recently”
The top dividend-payer list of stocks is Endeavour Mining PLC, B2Gold, Toronto-Dominion Bank, Magna, Quebecor, Whitecap Resources, iA Financial Corp, Suncor Energy, Imperial Oil, Bank of Nova Scotia, Atco, Great-West Lifeco, Manulife Financial, Empire, Canadian National Railway, Parkland, Gildan Activewear, BCE, Metro, CCL Industries, Open Text, Canadian Imperial Bank of Commerce, Canadian Tire, Canadian Utilities, Allied Properties REIT, Fortis, Hydro One, Canadian Natural Resources, Emera and TC Energy.
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UBS strategists believe Donald Trump will return as president,
“While acknowledging the limited sample size and different macroeconomic circumstances in each cycle, we believe current market pricing in US fixed income markets more closely resembles the lead-in to the 2016 Trump victory with a Red Sweep. In the last 3mo IG spreads are -12bp (vs. -13bp in 2016), HY spreads -38bp (vs. -63bp), and US 10yr rates +29bp (vs. +37bp). This is also largely consistent with UBS Evidence Lab’s Political Probability Monitor showing independent implied probabilities of a Trump/Harris victory at 64/41%, a Republican/Democratic House at 54/51%, and a Republican/Democratic Senate at 84/21%, respectively”
A footnote in the report implies that betting markets for political events is the source of the election prediction.
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BMO rates and macro strategist Benjamin Reitzes describes the unprecedented state of domestic bond yields relative to Treasuries,
“Canadian yields are 100 bps below comparable USTs right across the curve for the first time on record. We’ve seen more extreme levels at specific parts of the curve, but the current backdrop is unprecedented … The latest driver originates in the market pricing increasing odds of a Trump presidency and Republican sweep. Fears of tariffs and rising deficits are pushing UST yields higher … [domestic] economic data continue to disappoint. This week it was August GDP growth, which came in flat, on consensus expectations, but July was revised lower and the early estimate on Q3 was a mere 1% annualized. The latter is below the BoC’s 1.5% forecast … Governor Macklem made three appearances this week. While he didn’t tread much new ground, he reiterated that we’re “not close” to the limits of policy divergence between the U.S. and Canada. With the BoC already 100 bps below the Fed, his comments beg the question of just how far that limit is …. Mr. Macklem also added the tidbit that the weakening Canadian dollar is “not factoring” into the Bank’s decisions. That sounds like an invitation for the currency to continue on its depreciating trend”
Relative bond yields and crude prices are the two biggest drivers of the loonie’s value.
“What Canada’s Immigration Shift Will and Will Not Do” – BMO economics
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Diversion: “NASA Set to Resume ISS Spacewalks in 2025 After Terrifying Spacesuit Leaks” – Gizmodo