Hedge funds ‘reloading CAD shorts’, says Scotiabank analyst

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Scotiabank’s Shaun Osborne pointed to global hedge funds reloading on Canadian dollar short positions,

“CAD sentiment took another hit in the latest week’s data. CAD short-covering troughed at the start of May and investors in general have been reloading CAD shorts ever since. The increase in net speculative CAD shorts in the past week’s data is the biggest 1-week change in positioning in this report (up USD1.6bn). Data shows large increases in net Leverage and Real Money shorts over the same period as well, leaving total net CAD shorts at USD16.5bn, effectively a 50% increase over the past three weeks. The sentiment shift has (once again) coincided with a clear pick up in the CAD, however, which may put some of these freshly minted CAD shorts under a little pressure soon. Note speculative traders also added some USD600mn to their net AUD shorts this week (and added very marginally to net MXN and NZD shorts)”

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Domestic consumer sentiment is terrible, as BMO chief economist Doug Porter notes,

“The TSX cruised to a new all-time high in trading on Monday, and it’s up by 5% since the start of 2025. Suffice it to say that this runs against the common narrative surrounding the economic outlook, which is nothing short of dire among consumers and businesses. This gap has been well-noted for months now, but has become even more extreme in recent weeks with the snappy rebound in the TSX since early April. A bigger question arises: Are the consumer confidence surveys a good predictor of economic activity? As the accompanying chart suggests, confidence figures at least used to be very good coincident indicators of real spending activity. The pandemic clearly unsettled things (including the need to clip the chart’s scales surrounding that period). But the burst of inflation in recent years really threw things off kilter, with consumers rattled. And, more recently, consumer sentiment has slid deeply, even as real spending was likely still up 3% y/y in Q1 (and April retail sales held up just fine at +0.5%). The bottom line is that while we can’t ignore the confidence numbers, they appear to be sending a much more negative signal than the reality on the ground. Blame social media?”

“Canadian Consumer Sentiment: Woe is We” – (chart, excerpt) Bluesky

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Morgan Stanley chief economist Seth Carpenter sees the future of global economic growth as “skewed to the downside” (my emphasis),

“We see the imposition of tariffs by the US as an outsized, fundamental shock to the outlook … we hasten to add that tariffs remain and are likely to stay much higher than at the start of the year … Most importantly, the slowdown from tariffs that have already been imposed has yet to manifest in the hard data. We forecast global growth stepping down a full percentage point from 2024 to 2025, and a larger step-down in the US, from 2.5% 4Q/4Q last year to 1% this year. The risks to the global economy are probably asymmetric. A slowdown is likely despite the current de-escalation and even should we see a full reversal on tariffs, so the upside is limited. But a re-escalation could very easily tip the US – and the world – into recession.

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Raymond James strategist Tavis McCourt offered a market year in review and recounted the company’s “Concentrated Stock Pick List”,

“What A Crazy Year For Equities So Far: A narrow rally in the first few weeks, then punishing weakness in February/March (led by Tech) as global allocators moved investments outside the U.S., then “Liberation Day” collapse of all risk assets globally, followed by a rapid recovery led by Tech stocks recovering all “Liberation Day” losses, before finally some fear again getting priced into the market as we enter the Memorial Day three-day weekend in the U.S. Debates continue around the “One, Big Beautiful Bill” and tariffs and de-regulation (Treasury Secretary Bessent’s three-legged stool), making the combined impact on the U.S. government budget and economy incredibly difficult to determine. Equity and bond markets assumed near recession in early April, followed by overheating risk by mid-May. Uncertainty is likely to reign at least until at least July/August when 90 day tariff reprieves end and the One, Big Beautiful Bill is signed into law. Meanwhile, hard economic data continues to chug along, while earnings trends continue to be under pressure”

The stocks are Encompass Health Corporation, ICU Medical Inc., Hemonetics Corporation, Mercury Systems Inc., Equinix Inc., Chubb Limited, Sealed Air Corporation, UMB Financial Corporation, HealthEquity Inc, Shake Shack Inc. Class A, Mohawk Industries Inc., Coherent Corp., Globe Life Inc., Uber Technologies Inc. and M/l Homes, Inc.

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Bluesky post of the day:

Diversion: “A dental floss that can measure stress” – Phys.org