Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Energy stocks still attractive
Scotiabank analyst Chris MacCulloch resumed coverage of domestic large cap oil and gas stocks,
“Investment opportunities remain compelling despite strong returns. Although Canadian Oil & Gas equities have materially outperformed year-to-date, we continue to see upside in select stocks. In our view, stock returns were relatively tepid during the recent oil price surge, leaving multiples compressed and free cash flow yields elevated. We believe the case for higher longer-term oil prices has improved, with forthcoming support from stockpile rebuilding and a rejuvenated geopolitical supply risk premium … Natural gas equities have lagged, but the set-up is improving. Canadian natural gas stocks have lagged due to depressed AECO pricing, driven in part by mild winter weather in Western North America, resulting in elevated regional storage. However, the outlook is improving with demand tailwinds from LNG export and data centres, and we expect LNG Canada Phase 2 and Ksi Lisims to achieve positive final investment decision (FID) within the next 12-18 months. Meanwhile, Canadian natural gas equity valuations screen attractively … We have set our ratings and selected top picks based on a combination of (1) return to target, (2) relative valuation, (3) capital returns, (4) growth trajectory, and (5) potential catalysts. Given renewed weakness in oil prices, we have a strong preference for integrated producers offering exposure to our expectation of structurally elevated crack spreads, and we highlight Cenovus and Suncor as our top picks within the large-cap E&P space. Although persistent softness in AECO prices drives our relatively cautious approach to natural gas-weighted equities, we view Advantage as the most attractively valued Canadian SMid-cap E&P stock in our coverage.”
Flow Show still bearish
BofA Securities investment strategist Michael Hartnett’s weekly Flow Show report didn’t hold back on bearishness,
“Zeitgeist: “How far do hyperscalers need to fall for market to start trading capex cuts?” …. MAGS [Magnificent Seven ETF] <$60, AUDJPY <110, yield curve inversion catalysts for proper risk-off summer; meantime 16% [operating profit] margins = love for stocks, and liquidity pulled from mega-cap AI arms racers simply racing into semis & illiquid cyclicals (small/mid-cap, housing, REITs) to front-run Trump pivot to affordability … 2020s to remain era of fractured geopolitics and populist politics prioritizing booms over inflation; we say US dollar a “rent” not an “own”, gold … since Warsh’s term started on May 22nd, US Treasuries up 3.2%, stocks -1.6%; early days and nouveau-hawkish Fed yet to convince any investor to abandon core “Anything But Bonds” allocation, but Warsh thus far mirroring “lower yield” Fed chairs (Eccles, Volcker, Greenspan, Bernanke), and long the long-end remains most contrarian secular trade in markets.”
Not as frothy as 1999
Goldman Sachs’s weekly Briefings email compares current IPO activity to the 1990s tech bubble,
“The IPO market in the US is booming after a four-year stretch of muted public offerings: Around 50 companies have gone public in 2026, about double the number during the same period last year, according to Goldman Sachs Research. Even more remarkable is the size of the deals. At just the halfway mark of the year, 2026 is already roughly tied with the full-year record set in 2021, with about $120 billion in issuance … There are some similarities to the IPO rush at the turn of the century, [Goldman technology analyst Ben] Snider says. Equity valuations are very high, though not quite as high as in 2021 or 2000. Investor confidence is elevated, and there’s a focus on technological change amid advances in AI … A key difference between 2026 and previous peaks in the market is the number of IPOs. Over the past 25 years, the market has averaged about 100 deals per year, which is close to the pace so far this year. In contrast, there were more than 250 public offerings in 2021, and there were nearly 400 in 1999 …
“So although the dollar volume is quite elevated, although we’re seeing an acceleration in activity, to me it still looks like we’re a far cry from that level of euphoric sentiment that we saw in those episodes,” Snider says.
Diversion
“Heat waves mess with your brain. Scientists are trying to figure out why” – M.I.T. Technology Review
