Market Factors: Top Canadian stock ideas from TD Cowen research

NEWSLETTER Market Factors: Top Canadian stock ideas from TD Cowen research SCOTT BARLOW MARKET STRATEGIST PUBLISHED 14 MINUTES AGO COMMENTS SHARE SAVE FOR LATER This Market Factors starts with a readers’ favourite: high-conviction stock ideas from a major research house. Some of the picks surprised me, too. Section two also includes investment opportunities, in this case health-care stocks improving profitability by applying AI. The diversion carries important mental health information and we have Quick Hits as always. PICKS High conviction stock ideas TD Cowen released a list of top Canadian stock picks derived from their analysts’ highest-conviction investment ideas. The list is presented with a macroeconomic overlay of misunderstood and underappreciated market drivers from TD strategists Robert Both and Jayati Bharadwaj. The extent of Bank of Canada and Federal Reserve policy divergence is one of the important macro influences. TD argues that rising oil and gas prices have not flowed through to higher core inflation in Canada but are contributing to far stronger inflation pressure in the U.S. The Bank of Canada is on hold for now while the Fed is likely to raise rates further, which means domestic bond yields will be much lower than south of the border. The trend will put pressure on the loonie (foreign investment looks for higher yields) and reflects slower domestic growth. Canadian economic resilience in the face of U.S. tariff hikes is underappreciated, according to TD strategists. Domestic manufacturing output is down only one per cent from pre-tariff levels. Employment is down just 1.4 percentage points from the end of 2024 and current trends imply a full recovery is imminent. Federal fiscal spending has helped cushion the blow from tariffs. Mr. Both and Ms. Bharadwaj are looking for clarity on the economic effects of factors like immigration and household debt that are in the background because of the tariff war. There have been three consecutive quarters of population declines and the future trend of population growth, and its effects on GDP, are difficult to predict. The strategists don’t think high household debt levels will stay out of the news for long. Mortgage rates have been pushed higher as Canadian borrowing costs follow the lead of U.S. yields (although thankfully not to the full extent). Higher mortgage rates will restrict overall growth as borrowers renew. Now for the top picks. In the capital goods sector, Adentra Inc.…