Barlow’s Research Roundup: Three changes to Scotiabank strategist’s Strategic Edge Portfolio

Daily roundup of research and analysis from JOBFlocks’s market strategist Scott Barlow

Strategic Edge Portfolio from Scotia

Scotiabank strategist Hugo Ste-Marie reacted to an ongoing, global “earnings super cycle” and detailed three changes in his Strategic Edge Portfolio. The portfolio is Scotiabank’s domestic large cap portfolio that reflects their sector views, quantitative analysis and analyst ratings,

“Both the TSX and S&P 500 are now trading right on our year-end targets. Despite weak seasonality and rising bond yields, we’re lifting our earnings forecasts and boosting our target prices. Equities continue to offer upside potential. An earnings super cycle at hand? Main reason why equities have been able to climb such a wall of worries is that, ultimately, it’s earnings that drive equity returns; and this earnings cycle could be one for the history books. … [Strategic Edge Portfolio] August was challenging due to escalating trade frictions with the US, spiking LT bond yields, and TSX’s limited breadth (ex-gold). We’re tactically trimming Industrials to UW (from OW) and Discretionary/Autos (OW) as trade issues could worsen before getting better. If Canada goes ahead with its countermeasures on September 8, the U.S. could retaliate. Given weak seasonality, resuming geopolitical tensions and trade risks, we’re leaving some of the proceeds in Cash and rest goes to base metals where copper keeps rising. Our portfolio is thus OW Financials, Energy, Materials (both precious and base metals) as well as Discretionary. The rise in LT bond yields may continue to weigh on more defensive/interest-sensitive sectors. Line-up. We’re removing ATS in Industrials and trimming MG in Discretionary. Adding to FM in Materials and Cash (up to 2.3 per cent)”

The stocks in the Strategic Edge Portfolio are Royal Bank TD Bank, National Bank, Bank Of Montreal, Brookfield Asset Management, Onex, Great-west Lifeco, Power Corp, Fairfax, Colliers, Granite REIT, Alimentation Couche-tard, BCE, TC Energy, Keyera, Hydro One, Altagas, Transalta, Dollarama, Magna, Kinaxis, Shopify, Chartwell, Whitecap Resources, Canadian Natural Resources, Suncor Energy, Cenovus Energy, Tourmaline, Kinross Gold, Alamos Gold, Pan American Silver, Agnico Eagle, First Quantum Minerals, HudBay Minerals, Nutrien, Bombardier, Atkinsrealis, GFL Environmental, Finning International, CAE, Canadian Pacific Kansas City and First Quantium Minerals.

Triple Momentum

BofA Securities quant strategist Nigel Tupper identifies stocks representing triple momentum - upward movement in prices, earnings and news flow,

“In August, equity markets rebounded and Momentum strategies outperformed on renewed confidence in the AI investment cycle. Globally, stocks with Positive Triple Momentum (Q1) outperformed the equal-weighted MSCI AC World Index by 1.4 per cent. At the same time, investors realised AI disruption may have been overblown, so some outof-favour stocks also rebounded (including Software). Consequentially, Negative Triple Momentum (Q5) outperformed the global index by 1.2 per cent. Globally, Triple Momentum is strongest for Semiconductors, Tech Hardware, and Energy, and weakest for Media, Software, and Consumer Staples. Large liquid stocks (Mcap more than $20-billion, ADTV more than $20-million) with the highest Triple Momentum Rank in the US are Citizens Financial, Citigroup, and Bank Nova Scotia”.

Bank credit

Moody’s assessed the credit position of the domestic banks in a Thursday report,

“The six largest Canadian banks — Bank of Montreal (BMO, Aa2/A2 stable, a31,), Bank of Nova Scotia (BNS, Aa2/A2 stable, a3), Canadian Imperial Bank of Commerce (CIBC, Aa2/A2 stable, a3), National Bank of Canada (NBC, Aa2/A2 stable, a3), The Toronto-Dominion Bank (TD, Aa2/A2 stable, a2) and Royal Bank of Canada (RBC, Aa1/A1 stable, a2) — reported strong aggregate earnings in the fiscal third quarter that ended 31 July, up 14 per cent from a year earlier and 2 per cent sequentially. All comparisons are with Q3 2025, unless stated otherwise. Solid earnings growth reflects business diversification combined with operational efficiency. Performance was solid across most business segments, with strong year-over-year earnings growth reported across banks’ aggregate wealth management, capital markets and Canadian banking segments. Credit performance was resilient, with provisions for credit losses (PCLs) remaining broadly stable. Ongoing trade-induced uncertainty will weigh on credit costs in 2027 as US tariff policy remains a key drag on the Canadian economy by delaying investment, business expansion and hiring. .. Net interest margins (NIMs) improved from a year ago, with stable-to-rising NIMs likely in fiscal 2027. .. Aggregate loan growth improved, with wholesale loan growth outpacing retail loan growth. Aggregate loan growth was up 5 per cent from Q3 2025 and 3 per cent sequentially, given that commercial loans rose 8 per cent and retail loans grew 4 per cent from a year ago. Capitalization levels remain robust despite ongoing capital return…Liquidity remains high, though will revert to more historical levels. The average liquidity coverage ratio (LCR) was 133 per cent, down from 135 per cent in Q3 2025, while the average net stable funding ratio (NSFR) was 115 per cent, compared with 118 per cent a year earlier. Both ratios remain comfortably above regulatory minimums”

Bluesky post of the day

Diversion

“And it begins…(a good start…)" - Marginal Revolution