Daily roundup of research and analysis from The Globe and Mail\u2019s market strategist Scott Barlow<\/p>\n
BMO bank analyst Sohrab Movahedi previewed earnings in the sector (which start Tuesday) and presented top picks,<\/p>\n
\u201cQ3\/25 earnings season kicks off August 26, 2025, with BNS and BMO. Across the \u201cBig 5\u201d (ex. BMO) we expect cash operating EPS to be essentially flat y\/y, with growth slowing relative to H1\/25. Our estimates contemplate high-single-digit y\/y PTPP [pre-tax, pre-provision] industry earnings growth, with higher y\/y NIM [net interest margin} and mid-single-digit fee revenue growth offsetting muted loan growth; we expect sequentially lower performing PCL [provision for credit losses] builds but still higher total PCL ratios y\/y. While we maintain our \u201cbest offense is a good defense\u201d stance, we have a more optimistic earnings outlook for banks beyond Q3; this view is predicated on a stronger macroeconomic backdrop in Canada. In this regard, our preference is for names with greater exposure to the Canadian market (higher return on equity), which when combined with defensive qualities of credit allowances, liquidity, and capital levels, has us recommending outperform-rated CM, NA, and RY\u201d<\/p>\n
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CIBC analyst Stephanie Price summarized important findings about AI that could drastically affect market returns,<\/p>\n
\u201cRecent research from MIT\u2019s Project NANDA has found that despite widespread use of personal AI tools, enterprise AI initiatives have struggled to deliver meaningful ROI. The study tracked over 300 publicly disclosed AI initiatives, interviewing representatives from 52 companies, and collected survey responses from 153 senior leaders. The study found that the most effective AI deployments focused on enterprise solutions were process-specific and well integrated with existing workflows. The research also found that implementations carried out through external partnerships had higher success rates than internally developed projects.\u201d<\/p>\n
Megacap tech is leading the U.S. market in large part because of AI-related hype and investment. If the investment slows there is a good chance the S&P 500 pulls back. <\/p>\n
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BMO chief economist Doug Porter noted an important change in foreign investment in Canada,<\/p>\n
\u201cFollowing 11 consecutive years of outflows\u2014and sometimes large net outflows\u2014FDI [Foreign Direct Investment] has turned the corner. In the past four quarters (to Q1) there was a net FDI inflow of $21 billion, compared with a $65 billion net outflow in the four quarters to 2024Q1. This sudden turnabout reflects both a big pick-up in the amount of investment flowing into Canada from abroad (to its best level since pre-GFC days), but also a notable slowdown in Canadian companies investing outside of the country. This positive reversal has kept the Canadian dollar from weakening even further over the past year, even as the current account has swelled and portfolio investment flows have turned heavily outward\u201d<\/p>\n
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Investor assets are fleeing emerging markets and I need to consider the implications. Here\u2019s Citi\u2019s Alex Saunders,<\/p>\n
\u201cEM aggregate outflows accelerated further with outflows seen across all investor types. By region, LatAm recorded outflows mainly led by banks, with leveraged investors turning to net sellers. Outflows in Asia marginally accelerated with real money investors reversed to net sellers. CEEMEA [Central & Eastern Europe, Middle East and Africa] stood out as the sole region receiving net inflows, with inflows seen from both real money and leveraged investors.\u201d<\/p>\n
TSX returns have been highly correlated with the MSCI Emerging Markets index historically but there\u2019s a lot of currency trends built into that. <\/p>\n
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Bluesky post of the day: <\/p>\n
JUST IN \ud83d\udea8: U.S. Stock Market hits its most expensive valuation in history, surpassing the Dot Com Bubble and the run-up to the Great Depression \ud83e\udd2f<\/p>\n
[image or embed]<\/a><\/p>\n \u2014 Barchart (@barchart.com<\/a>) August 24, 2025 at 8:47 PM<\/a><\/p>\n https:\/\/bsky.app\/profile\/barchart.com\/post\/3lx6rnak3ec23<\/a><\/p>\n