Foreign investment ‘highlights concerns about the attractiveness of doing business in Canada,’ says BMO economist

A daily summary of research and analysis from Scott Barlow, market strategist for The Globe and Mail

BMO economist Shelly Kaushik notes that Canada is not a popular destination for foreign direct investment,

“After a multi-year period of soft foreign direct investment (FDI) inflows, Canada reached a new milestone in the first quarter – these flows represented net disinvestment from the country for the first time in 14 years. It is true that this amount was influenced by merger and acquisition activity in the finance and insurance sectors, but it is still worth noting that other activities (e.g. mergers and acquisitions in other sectors, reinvestment of corporate profits, etc.) did not provide sufficient compensation. On the other hand, direct investment abroad by Canadian companies increased during the quarter, partly as a result of the highest level of merger and acquisition activity in a year. Overall, foreign investment patterns remain weak, even beyond quarterly changes. This softness highlights concerns about the attractiveness of doing business in Canada, which in turn affects growth prospects.”

“BMO: Canada is not a popular destination for foreign capital” – (chart, fragment) X

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Lori Calvasina, head of global capital strategy at RBC Capital Markets, conducted a survey on the US oil and gas sector,

“The sector looks attractive in our valuation model, which takes into account its own valuation relative to its long-term history, as well as the sector’s valuation relative to the broader S&P 500 index. The sector mainly sees upward revisions in both earnings and revenues. . Although it should be noted that profits have a greater dynamics of positive corrections than revenues. After peaking in mid-April this year, flows have recently lost momentum. This deteriorating trend is also visible in the remaining cyclical and commodity-oriented sectors. Like most cyclical sectors, the sector has had a positive performance on the S&P 500 in the second half of presidential election years. We believe cyclical indices outperform defensiveness around the election as the broader market rises as optimism in the economy increases and investors overcome uncertainty surrounding the event. From a macro-indicator point of view, the sector shows a moderately positive correlation with the yield of 10-year bonds. With this in mind, we viewed our overweight position in the sector as a hedge against expectations that inflation and interest rates would moderate this year.”

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BofA Securities investment strategist Michael Hartnett’s weekly Flow Show report is as striking as ever:

“Political polarization, protectionism, war, inflation, supply (even Saudi Arabia on its way to record bond issuance in 1924) mean that a secular ‘buyers’ strike’ of world government bonds is justified; but cyclicality always manages to trump secularism and we say that the 3Ps of positioning, profits, politics means the inversion of H2 of the “ABB” trade “everything but bonds”; buy on any drop in bond prices, and in the case of loans and stocks, “sell the first cut” still applies. The price is right: capital ‘breadth’ at worst since March 2009 as artificial intelligence ‘displaces’ dollars from Wall St and Main St; The 2020s are just one tough trade after another… next is “value” outperforming “growth” stocks + “windows” as economic growth slows… Biggest picture: Higher yields and a weaker currency “no bueno” = sign of things to come the debt crisis;

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Diversion: “The best post-apocalyptic films of all time, ranked by survival rate” – The Ringer

Column: “Watch these two metrics for tips on how to position your portfolio this year” – Barlow, Inside the Market