The Globe and Mail reports in its Wednesday, Jan. 28, edition that Bank of America strategist
Michael Hartnett advised
clients to short Canadian banks
and buy United States banks with the proceeds
as one of his top 15 trade
ideas for 2015. The Globe's Scott Barlow writes that the trade is
working extremely well in large
part because of the weakness of
the loonie. Recent information suggests
it might start working even
better in the months ahead.
Mr. Hartnett's pessimism on
Canadian banks is based on oil
prices and the condition of the
real estate markets on both sides
of the border. He believes that weaker
crude prices will have a larger
negative effect on the Canadian
economy than in the U.S. Also, Canadian bank lending
related to real estate will
slow while U.S. loans to home
buyers and commercial real
estate investors will accelerate.
New home sales in the U.S. in December saw an 11.6-per-cent
month-over-month gain in sales,
the strongest set of December
results since 2007. This was
above expectations
of a 2.7-per-cent increase and a
clear sign of strength in the U.S.
housing market.
So far, Mr. Hartnett's trade idea
has worked well but solely
because of currency.
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