BMO Capital Markets analyst Jenny Ma says “something’s gotta give” in the domestic real estate sector,
“2023 Outlook: Something’s Gotta Give … We approach 2023 with caution as the adjustment process continues and the spectre of a recession looms. 2022 was a tumultuous year for real estate investors, as illustrated by the year-to-date total return of negative 15 per cent for the S&P/TSX Capped REIT Index. Although the sector has rebounded strongly following material down-years in the past , we believe investors’ expectations should be more tempered in 2023.
“Throw out the U.S. recession playbook, it is different this time. Reasons include: less smooth earnings for diversified multinationals as globalization takes a pause. Democratized investing, financial asset deflation and job losses in the upper income strata suggest luxury goods may not be defensive, and the wealth effect may be outsized. Oil companies have capital discipline, Tech companies are in regulators’ cross-hairs.
“Recent commentary from corporates supports our bullish view that the Inflation Reduction Act will be a catalyst for acceleration in Green Capex and benefit stocks through the supply chain. The combination of IRA incentives with the wide discount in electricity/natural gas prices in the US vs. Europe is likely to lead to industrial shifts towards the US, in our view.
There are too many stocks to list them all but some that are likely to be most of interest to Canadian investors include Sunrun Inc., Solaredge Technologies, Nutrien Ltd., Linde PLC, Air Products and Chemicals, Johnson Controls International, Jabil Inc., General Motors Co., ABB Ltd., General Electric co. MasTec Inc., Waste Management Inc., Vestas Wind Systems, and First Solar Inc.