Daily roundup of research and analysis from The Globe and Mail\u2019s market strategist Scott Barlow<\/p>\n
RB Advisors have published their annual Charts for the Beach report, highlighting the most important depictions of market forces. Chart No. 3 called Has Stagflation Arrived? caught my attention,<\/p>\n
\u201cSome stagflation ( stagnating growth with rising inflation) appears in every late-cycle environment simply because inflation is a lagging variable relative to growth. As the cycle ages, growth tends to slow but inflation doesn\u2019t. The current cycle is following that historical path. More importantly, though, it is the first time since prior to the Global Financial Crises that stagflation has appeared. The following chart shows the ISM Services Prices Paid Index (a proxy for inflation) versus the ISM Services New Orders (a proxy for growth). One can see stagflation potentially forming for the first time in more than 15 years\u201d<\/p>\n
The diversion on this chart is a bit shocking. Full report here<\/a> <\/p>\n ***<\/p>\n Domestic and U.S. natural gas production is ramping up according to RBC Capital Markets analyst Michael Harvey, a factor depressing commodity prices in the near term,<\/p>\n \u201cAlongside lower AECO prices and LNG expansion we note an elevated number of drilled, uncompleted (\u2019DUC\u2019) gas wells within the WCSB. DUC count has trended higher and now maps to around 480 wells which corresponds to roughly 2.4 bcf\/d of IP30 gas production (over 10 per cent of total basin gas volumes), which is about 50 per cent higher than the \u2018baseline\u2019 average. Given a DUC count above historical averages, we expect gas supplies to remain robust – likely alongside continued wider pricing differentials – into the full ramp-up of LNG Canada \u2026Key players with meaningful DUC inventory include Tourmaline Oil (91 DUCs), ARC Resources (62), ConocoPhillips (44), Whitecap Resources (36), and Petronas (45), along with the LNG Canada operator Shell (20) and other public\/private producers. Maintaining an active DUC count is essential for all operations, and in many cases reflects the pad-drilled nature of most Montney play; the majority of DUCs are Montney wells (roughly 68 per cent of total)\u201d. <\/p>\n Mr. Harvey has an outperform rating on Birchcliff Energy Ltd, Kelt Exploration Ltd, Freehold Royalties Ltd, ARC Resources Ltd, Tourmaline Oil Corp, Kiwetinohk Energy Corp, Tamarack Valley Energy, Topaz Energy Corp, Whitecap Resources Inc and PrairieSky Royalty Ltd. <\/p>\n ***<\/p>\n The removal of hedging against increases in the U.S. dollar \u2013 this involves selling USD positions to buy loonies – has left the Canadian dollar vulnerable to a decline as Citi currency strategist Dan Tobon reports<\/p>\n \u201cCAD is becoming a more attractive G10 short as supportive Real Money CAD flows \u2013 which we largely ascribe to hedge ratio adjustments \u2013 may be coming to an end. We note Citi flows show Real Money buying has largely plateaued \u2026 USDCAD has seen some deviation from a 2y [bond yield] differential fair value model; that mis-valuation appears to be largely explained by Citi\u2019s Real Money Positioning Indicator [the hedging unwinds] \u2026 Interestingly, an August 12 report shows one of Canada\u2019s biggest pensions already reduced its USD exposure by 56 per cent (Bloomberg, August 12), without a similarly meaningful adjustment to its non-Canadian equity or fixed income position. In other words, the majority of that USD reduction was an FX hedge ratio adjustment \u2013 a substantial adjustment. Another major Canadian pension also noted a hedge ratio adjustment of almost 50 per cent\u201d<\/p>\n I am not 100 per cent sure of the mechanics here but what has happened is that large scale loonie buying, driven by hedge unwinds, has pushed the Canadian dollar beyond the value where domestic and U.S. government bond yields indicate. A return to fair value according to bond yields would involve a weakening loonie.<\/p>\n ***<\/p>\n Bluesky post of the day: <\/b><\/p>\n \ud83d\ude2c IEA\u2019s ugly ugly latest oil market balance outlook.<\/p>\n 4 MMbpd 1Q26 balance would\u2026 be bad.<\/p>\n But, if this came anywhere close to true, prices would do their work far before this was ever realized.<\/p>\n [image or embed]<\/a><\/p>\n \u2014 Rory Johnston (@roryjohnston.bsky.social<\/a>) August 13, 2025 at 10:22 AM<\/a><\/p><\/blockquote>\n\n