Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO analyst Ben Pham highlights significant upside for two Alberta-centric power producers Capital Power Corp. (CPX-T) and TransAlta Corp. (TA-T),
“While Alberta power levered equities CPX and TA have rebounded from lows earlier in the year on improved Alberta AI-data center newsflow (interconnection queue now approximately 20GW), they are still laggards in our coverage year-to-date 2025 and notably have underperformed U.S. IPPs by 60 per cent. Should CPX/TA land a data center contract potentially as early as year-end, we anticipate significant share price upside through higher utilization, pricing, and valuation with a knock-on benefit of higher long[1]term Alberta power prices as supply/demand tightens on new data load. We estimate potential 2027E NAV of $80 for CPX and $29 for TA with data center success vs. current target prices of $64/$20, respectively (up 25 per cent/up 45 per cent). As such, we maintain our Outperform rating/Top Pick designation for TA and Outperform rating on CPX”
***
CIBC senior economist Andrew Grantham believes the apparent stability in Canadian employment is deceptive,
“Job growth appears to be accelerating again and the unemployment rate has barely increased since trade uncertainties flared up earlier this year. It seems too good to be true. Unfortunately, that’s probably because it is … If the Canadian labour market is weaker than advertised, this slack should eventually place downward pressure on core measures of inflation and bring a couple more interest rate cuts from the Bank of Canada later this year … the quarterly population count [is] decelerating sharply largely because of the impact of NPR’s [non=permanent residents] . In this situation the LFS population figures (and by extension employment growth) may end up being revised downwards at some point in the future … If the year-over-year growth rate in population within the Labour Force survey matched the recent quarterly data, and assuming the employment-population ratio is correct, then job growth over the past year could be cut down to a fraction of what is currently reported”
The report is wonky and it’s helpful to read the whole paper here.
***
Citi economist Veronica Clark predicts that the bank of Canada will hold rates steady Wednesday but also thinks a series of cuts will take the policy rate down to 1.75 per cent in early 2026,
“The Bank of Canada is very likely to keep rates unchanged at 2.75 per cent on Wednesday, but we also see dovish risks relative to markets pricing less than one additional cut this year. Most importantly, we expect Governor Macklem to reiterate the loose guidance from June that further rate cuts could be necessary if the economy weakens and inflation is contained. We continue to see downside risks to growth and inflation that would suggest rates at outright accommodative levels this cycle. We pencil in cuts resuming in September and rates falling to 1.75 per cent by early next year. The most dovish development at the July decision would be if Governor Macklem’s allusion to rate cuts in the June opening remarks is formalized in the policy guidance in the statement. This is not our base case, with formal guidance instead likely to remain open-ended, not mention possible changes in policy rates at all. But we do expect this indication that rates may still fall further to be maintained in the opening remarks. Other dovish remarks would be echoing the Business Outlook Survey that weaker demand is broad-based. It would be a hawkish surprise if the loose guidance towards further rate cuts is removed altogether”
***
Morgan Stanley’s global head of research Katy Huberty singled out bullish strategist Michael Wilson as one of the most important calls of the week,
“Our US Equity Strategy team views the capitulatory price action and EPS estimate cuts in April as the end of a rolling earnings recession that began in 2022, and they argue that the market now appears to be transitioning to a rolling recovery backdrop driven by operating leverage, AI adoption, dollar weakness, cash tax savings from the One Big Beautiful Bill Act (OBBBA), pent-up demand, and potential for Fed cuts by 1Q26. They highlight that for the S&P 1500, historical EPS growth comparisons are low, as more than half of the S&P 1500 stocks suffered negative EPS growth for much of the last 3 years. Their base case 12- month price target for the S&P 500 is 6,500, but they believe the probability of their Bull Case of 7,200 (22.5x forward EPS of $319) is rising”
***
Bluesky post of the day:
JPM DESK: “.. The S&P 500 has now rallied more than 25% over the past 75 days, the largest 75-day rally since the rebound from the COVID lows. Forward-looking returns after a rally like this are quite strong. A year later, the index was higher every single time with an average return of around 20%.”
— Carl Quintanilla (@carlquintanilla.bsky.social) July 28, 2025 at 5:54 AM
Diversion: “Fertility Rate in the U.S. Reached an All-Time Low in 2024, CDC Data Reveals” – Gizmodo