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BoC holds rate, forecasts recovery by 2022 – Investment Executive

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The bank’s updated outlook in its monetary policy report said the rebound over the summer was stronger than expected as the country reversed about two-thirds of the decline seen in the first half of the year.

Officials estimate the economy will shrink by 5.7% this year, but grow by 4.2% next year, and 3.7% in 2022, meaning gross domestic product won’t rebound to pre-pandemic levels for another two years.

In his opening remarks at a late-morning press conference, governor Tiff Macklem said it will take quite some time for the economy to fully recover from the Covid-19 pandemic, and the path will be “uneven across sectors and choppy over time.”

“We know the pandemic is reducing investment and is likely to cause long-lasting damage to some people’s job prospects. These forces will reduce Canada’s economic potential,” Macklem said.

The report forecasts annual inflation at 0.6% this year, 1.0% next year, and 1.7% in 2022.

The bank held its overnight rate target at 0.25% on Wednesday, which is where it will stay until the economy has recovered and inflation is back on target.

The bank also announced Wednesday that it intended to buy more longer-term bonds because those have a “more direct influence on the borrowing rates that are most important for households and businesses.”

James Laird, co-founder of Ratehub.ca said the outlook suggests low interest rates until at least 2023, which is the earliest the bank anticipates the economy would be able to handle higher rates.

The projections for growth and inflation mark a return to the bank’s usual practice of giving a longer view for the economy in its quarterly monetary policy report.

The report said the six months of experience with containment measures and support programs, as well as more information on medical developments like vaccines, has given the bank a better foundation to make a base-case forecast.

Underpinning the bank’s outlook are two major assumptions: That widespread lockdowns won’t be utilized again and that a vaccine or effective treatment will be widely available by mid-2022.

The country has recouped about two-thirds of the three million jobs lost in March and April. Emergency federal aid has replaced lost wages for millions of workers, and provided loans and wage subsidies to struggling businesses.

The recuperation from the drop earlier this year has been uneven, the report notes. The hardest hit sectors, such as restaurants, travel and accommodations, continue to lag.

Workers in those sectors, as well and youth and low-wage workers, continue to face high levels of unemployment, the report says.

All may be hit hard again by any new rounds of restrictions, the report notes. Some areas of the country have already imposed such public health restrictions in the face of rising Covid-19 case counts.

“The breadth and intensity of re-imposed containment measures, including impacts on schools and the availability of child care, could lead to setbacks,” the report says.

“Long breaks in employment have the potential for longer-term impacts on the income prospects of vulnerable groups.”

The report said government aid has played a key role in providing a financial lifeline to individuals and businesses.

Changes to employment insurance and new benefit programs will increase households’ disposable income, officials write, adding that the bank expects government aid to “provide important support to the economy throughout the recovery.”

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Scotia's top 10 investment themes for 2021 include 'the hunt for yield intensifies' – The Globe and Mail

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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

The equity strategy team led by Hugo Ste-Marie at Scotia Capital published 10 Themes for 2021 – Unleashing Excess Cash Tuesday morning.

The top themes are,

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“1. Piles of stacked cash could soon turn into hot money. 2. Synchronized downturn, synchronized upturn 3. The road to US$200 EPS 4. Income scarcity: The hunt for yield intensifies 5. Bond yields: The great normalization 6. Go Global 7. Small could be big in 2021 8. Hard assets shining, CAD roaring 9. Sector rotation favors cyclicals 10. No Value left behind [and]11. Bonus – Capital markets spring back to life”

Here’s an excerpt from the section on yield scarcity,

“Interest rates on cash deposits and government bond yields should remain quite anemic next year. As traditional sources of income can’t fulfill their role anymore, the hunt for yield will likely intensify and investors will have to look for alternatives. Equities appear an obvious choice. After a challenging year, dividend growth should resume in 2021 on the back of improving profitability trends. Moreover, dividend yields have rarely been this attractive versus government bonds in over half a century”’

” @SBarlow_ROB Scotia: “10 Themes for 2021 – Unleashing Excess Cash” – (research excerpt) Twitter

***

Morgan Stanley has updated its “Fresh Money Buy List” of top U.S. stocks picks, removing S&P Global Inc. because of “regulatory and/or policy restrictions”.

The remaining list consists of Ally Financial, Citizens Financial Group Inc., Walt Disney Co., Humana Inc., Johnson & Johnson, Linde PLC, Mastercard Inc., PVH Corp., and T-Mobile U.S. Inc.

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“@SBarlow_ROB MS drops S&P Global from its Fresh Money Buy List of U.S. picks” – (table, including performance) Twitter

***

Also from Morgan Stanley, the technology and telecom research team led by Katy Huberty published a report outlining the bright outlook for 5G-related stocks and provided a list of stock ideas (my emphasis),

“We are buyers of stocks exposed to stronger than expected consumer 5G demand. Consumer smartphone purchase intentions are the strongest in recent history according to our AlphaWise survey of nearly 3,500 consumers in the US and China. The main driver is demand for 5G, which is now the primary reason consumers are upgrading in the US and China – a comparatively bigger catalyst than any other recent technology upgrade and a more bullish signal relative to investors’ more cautious stance. We highlight key takeaways across our global technology and telco services teams and recommend owning a group of stocks that we view best positioned for 5G infrastructure investment and smartphone demand upside.”

The top 10 5G-related stock ideas are Apple Inc., T-Mobile US Inc., Qualcomm Inc., Delta Electronics Inc., Samsung Electronics Co Ltd., Sunny Optical Technology Company Ltd., China Mobile Ltd., Taiwan Semiconductor Manufacturing Company Ltd., Murata Manufacturing Co. Ltd. and Ericsson.

“@SBarlow_ROB MS: Top 10 5G-related stock picks” – (table) Twitter

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New column from me: “What investors can learn from the top performing U.S. value stocks” – Inside the Market

Diversion: The Ringer’s panel rewatches and discusses the 1980s movie Wall Street – The Ringer (podcast)

Tweet of the Day:

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

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Mackenzie Investments Strengthens Commitment to SRI Investing by Forming New Investment Boutique with Greenchip Financial – Canada NewsWire

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Acquisition will enhance Mackenzie’s in-house expertise in growing Sustainable, Responsible and Impact (SRI) investing space

TORONTO, Dec. 1, 2020 /CNW/ – Mackenzie Financial Corporation (“Mackenzie Investments”) today announced that it has entered into an agreement to acquire Greenchip Financial Corp. (“Greenchip”), a Canadian firm focused exclusively on the environmental economy since 2007.

“We’re delighted to welcome Greenchip as our newest investment boutique focused on environmental thematic investing,” said Barry McInerney, President & CEO, Mackenzie Investments. “Canadians have historically had limited options available for investing in the environmental sectors.  We believe that Greenchip’s investment strategy and expertise in energy transition and on climate change will help us meet the growing demand of both retail and institutional investors.”

Mr. McInerney noted that Mackenzie has been a leader in bringing impact investing to Canadians, with an evolving suite of funds focused on environmental leadership, gender diversity and sustainability. “The acquisition of Greenchip is a natural evolution reflecting the success of Greenchip’s sub-advisory relationship to the Mackenzie Global Environmental Equity Fund. The Fund has been growing very rapidly, and we expect this to continue as our internal research suggests that 80 per cent of financial advisors prioritize environmental or climate related factors in their selection of SRI investing products.”

Over the past 13 years, Greenchip’s long-term investment performance is top quartile among environmental thematic mandates and the firm has developed unique sector expertise that is not easily duplicated.  Greenchip currently manages an investment strategy with a global energy transition theme and oversees more than $485 million in assets on behalf of foundations, endowments and Canadian families (this amount includes $315 million in assets in the Mackenzie Global Environmental Equity Fund).

Their investment process starts with an exclusive focus on companies whose revenues are generated from selling products within the environmental sectors that aim to support the transition towards sustainable forms of energy. These generally fit into six sectors: renewable energy, energy efficiency, clean technology, water, sustainable agriculture, and transportation.

“Directing capital to sustainable infrastructure and environmental solutions has never been more important,” said John Cook, Co-Founder and President of Greenchip Financial. “Partnering with Mackenzie is not just a great cultural fit – it will enable us to take our sector expertise to a much broader group of investors.”

Mackenzie’s SRI Investing team, led by Fate Saghir, Head of SRI Investing, has taken a number of steps to better address climate change, including supporting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), alongside its parent company IGM Financial. SRI investing has been identified by Mackenzie as one of its key business growth catalysts and the firm renewed its commitment to the United Nations’ supported Principles for Responsible Investment by establishing an SRI Centre of Excellence to enhance its SRI practices, capabilities and products.  

About Mackenzie Investments
Mackenzie Investments (“Mackenzie”) is a leading investment management firm with $144.5 billion in assets under management as of October 31, 2020.  Mackenzie provides investment solutions and related services to more than one million retail and institutional clients through multiple distribution channels. Founded in 1967, Mackenzie is a global asset manager with offices across Canada as well as in Boston, Dublin, London, Beijing and Hong Kong. Mackenzie is a subsidiary of IGM Financial Inc.  (TSX: IGM), one of Canada’s premier financial services companies with approximately $193 billion in total assets under management as of October 31, 2020. IGM is part of the Power Corporation of Canada group of companies. For more information, visit mackenzieinvestments.com.

About Greenchip Financial Corp.
Greenchip Financial Corp. is an independent environmental investment firm founded in 2007 on a thesis that changing demographics, resource scarcity, and environmental degradation would drive historic opportunities and new risks for investors. Greenchip manages one global environmental equity strategy with over CAD $170 million on behalf of endowments, foundations, and high net worth individuals. Since 2018, Greenchip has also sub-advised the Mackenzie Global Environmental Equity Fund. For more information on Greenchip, please visit greenchipfinancial.com.

SOURCE Mackenzie Investments

For further information: Nini Krishnappa, IGM Financial, 647-828-2553 [email protected]

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Pandemic to stimulate more active stock investment strategies: Nissay Asset CEO – TheChronicleHerald.ca

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By Hideyuki Sano and Tomo Uetake

TOKYO (Reuters) – Social transformations triggered by the coronavirus pandemic are making index-following, passive stock investments less attractive and could reverse a decline in active stock investments, the chief executive of Nissay Asset Management said.

Hiroshi Ozeki said a recovery to pre-pandemic levels will be difficult for some industries such as restaurants, airlines and train operators.

Energy-intensive sectors also would be pressured by the need to deal with climate change, he added.

“Even after the pandemic is over and even with some government help, they won’t return to where they were,” said the chief of the 13 trillion yen ($125 billion) asset management firm.

“Up until now, passive style has been a vogue – it’s been said to be the most efficient investment. But with that, you are automatically putting your money in those industries with no growth stories,” he said.

Assets held by exchange traded funds (ETFs), among the most convenient passive investments, have been increasing globally over the last decade.

In contrast, active funds, which try to aim for higher returns based on stock picking, have seen large outflows in recent years.

“In the coming few years, active investments are likely to outperform passive ones. The era of active investment may be back,” Ozeki said.

Companies which Nissay scores highly for Environment, Social and Governance (ESG) had done better this year, he said.

Enterprises poised to benefit from the shift to renewable energy would prosper after the United States and Japan join other countries in adopting ambitious targets to achieve carbon neutrality.

U.S. President-elect Joe Biden has committed to net zero emissions by 2050 and Japanese Prime Minister Yoshihide Suga in October set the same goal for Japan.

“Some companies that have committed to 100% renewable power targets, such as Sony and Ricoh, are saying that Japan is now becoming the bottleneck among the developed world in achieving that goal,” he said, citing limited availability and high costs of renewable energy.

“So it means a lot that Suga has made that target. For investors, too, it reduces risk when the government clarifies its long-term goal,” Ozeki said.

Ozeki also said for next year he expected:

* Global share prices to rally further as the pandemic lasts longer than expected, forcing policymakers to continue to support the economy through monetary and fiscal measures.

* Short-term U.S. interest rates to stay low, making currency-hedged dollar bond investments attractive for Japanese investors.

Follow Reuters Summits on Twitter @Reuters_Summits

(For more summit stories, see)  

(Reporting by Hideyuki Sano in Tokyo and Tomo Uetake in Sydney; Editing by Stephen Coates)

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