‘Broad-based decline in momentum’ for Canadian rents, says BMO REIT analyst

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO real estate analyst Michael Markidis published REITs Nation: Turkey Day Edition on Monday,
“It was another tough week (ended October 11) for the Canadian listed-property sector. Specifically, the S&P/TSX Capped REIT Index was -2.1%, extending the pull-back from the mid-September peak to -6.4%. The weakness was broad-based; all 16 index constituents finished in the red. NWH (-8.2%) materially underperformed, as investors digested Craig Mitchell’s resignation announcement. BEI (-0.7%) was a notable outlier at the other end of the spectrum. At 3.21%, the 10-year GoC benchmark yield is +34bps since September 16 and virtually unchanged from the beginning of this year … the national average asking rent increased +2.1% y/y to $2,193, though it has remained range bound ($2,174-2,202) over the past year. In our view, the data points to a broad-based decline in momentum across most major markets. From our lens, it is difficult to envision a catalyst for re-acceleration in the short term given (1) that we are entering a seasonally slower period of demand, (2) uncertainty with respect to the potential impact of the soon-to-be-released update to the immigration levels plan”
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Citi analyst Nathaniel Rupert is getting increasingly optimistic about risk assets,
“We have moved from the ‘Growth shock’ cluster to ‘Recovery’. This is positive risky assets, but bonds have also historically done well.
“‘Reflation’ is a likely next scenario — We perform scenario analysis to understand what the likeliest transition out of a recovery cluster would look like for asset prices. Broadly, a ‘reflation’ transition would bring us back into ‘Normal’ or ‘Goldilocks’, both of which are positive environments for risky assets. On the margin, equities and credit look more attractive, rates less so … In last month’s update of our asset allocator positioning piece, managers were underweight credit and overweight precious. These positions are the most at risk if we stay in a recovery environment”
This strategic advice to add cyclical stocks is an evident trend among Wall Street strategists.
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RBC head of commodity strategy Helima Croft reports back after meetings in Washington D.C.,
“At the moment, the White House seems to be scrambling to prevent Israel from attacking Iran’s oil facilities in response to last week’s missile strikes . Today, the Office of Foreign Asset Control announced that it was sanctioning a number of shipping companies and trading houses involved in the Iran oil trade, including entities in the UAE, Hong Kong, and China . We see this move as likely designed with an eye to keep Israel from striking Iranian oil facilities, such as the export infrastructure on Kharg Island. However, it is not clear how much today’s action will move the needle … Even with the measures announced today, Prime Minister Netanyahu may judge that Washington is not sufficiently serious about restricting Iranian exports at this juncture. Hence, he may greenlight strikes on the Iranian oil infrastructure”
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Diversion: “The 10 Most Nightmare-Inducing Movies on Max” – Gizmodo