Q: Looking for the possible positive scenarios in investing in BNS.
If a series of events led to 10%+ inflation (i.e. countries lose the inflation battle), I'm assuming commodities would then become very attractive. Recognizing BNS's Latin America exposure (i.e. commodity producing nations) yet on the other hand also recognizing that persistent high inflation is not necessarily a good thing, would this be a scenario where BNS could become a better investment relative to the other Big 5 ?
Not sure if there are any other positive situations. Mind you their residential mortgage exposure is better than the others.
If a series of events led to 10%+ inflation (i.e. countries lose the inflation battle), I'm assuming commodities would then become very attractive. Recognizing BNS's Latin America exposure (i.e. commodity producing nations) yet on the other hand also recognizing that persistent high inflation is not necessarily a good thing, would this be a scenario where BNS could become a better investment relative to the other Big 5 ?
Not sure if there are any other positive situations. Mind you their residential mortgage exposure is better than the others.
5i Research Answer:
It is debatable. Latin American countries' commodites exposure would help their economies. But in such a scenario we would expect rates to rise, and the US dollar to be strong. This would be an offset. In a stagflation scenario investors would likely be more worried about emerging market economies than the US. Bank investors would also likely worry about losses arising from higher interest rates. So we would not bet on high inflation helping BNS that much. Now, we can see a scenario with higher commodity prices and muted inflation. We could see a scenario where Latin America grows quicker than the rest of the world as well. BNS (it appears at least) is playing the long game here, gaining market share when no one else wants to.