Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
I hold a lot of cash in my personal accounts right now and that is likely to remain the case – I have very little trust in the sustainability of any broader investment theme. There are individual sectors like medical equipment and cloud computing, where I love the outlook, but the stocks I want to own – specifically Red Hat and Stryker – are too expensive and volatile.
Economic conditions in the world's two largest national economies have been very consistent while markets become alternatively depressed and optimistic about the potential for change. In commodities, the recent rally is understandable but for me untrustworthy because global growth rates continue to be ratcheted lower. This might turn out to be a good summer to do nothing.
"Citi: Expectations, not data, are driving stock prices" – Report on Business (April 2016)
"A lot more than oil driving the Canadian dollar" – Barlow, Report on Business (today online and in print)
"Pfizer tops forecasts, lifts guidance" – FastFT
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Bloomberg's Javier Blas would be my pick as the best non-Canadian beat writer on the energy sector. Tuesday morning, Mr. Blas cites experts who believe there's less than meets the eye behind the recent crude rally,
"Front-month futures for West Texas Intermediate, the U.S. benchmark, have risen 21 percent this year, but the recovery looks very different if you focus on the longer term. The five-year-forward WTI contract fell 2.6 percent over the same period, reflecting the view that shale oil production could rebound as prices recover, capping any rally. "'The markets may be getting ahead of themselves,' Michael Wittner, an oil analyst at Societe Generale SA in New York, said in a note to clients. 'We still believe sustained front-month WTI at $45 to $50 will be self-limiting, as U.S. shale-producer spending and drilling would stabilize and perhaps recover.'"
"Oil Price Rally Isn't as Deep Rooted as It Looks at First Glance" – Blas, Bloomberg
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Financial Times columnist Gavyn Davies argues that the risks of a global recession are fading,
"Global activity growth is somewhat better, especially in the emerging economies, but it is still a long way from being satisfactory… The latest nowcast shows a rebound in global activity growth to 3.4 per cent, which is just below trend. Growth in the advanced economies has rebounded from a low point of 1 per cent in February to 1.4 per cent now (ie still about 0.3 per cent below trend). Growth in the emerging economies has jumped from 3 per cent in February to 5.5 per cent now, which is at trend for the first time in three years. However, the rebound in the emerging economies is driven by improvements in China and Brazil, both of which are subject to large risks of renewed setbacks in coming months."
"Fading risks of global recession" – Davies, Financial Times
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The American Enterprise Group economist James Pethokoukis cites sources to argue that American manufacturing jobs won't ever come back. I'm not sure at this point how far the argument can be extrapolated to Canada,
"even if China blinked out of existence tomorrow, there just wouldn't be a need for much of the work America lost. While low-skilled labor dominated manufacturing in decades past, automation and computers have made factory floors both tremendously productive and relatively human-free. A revitalized American manufacturing sector would raise employment, but not to the levels seen in 1979—a heyday that economists say is unlikely to be repeated. "We couldn't afford to do that anymore," said Hal Sirkin, a senior partner at the Boston Consulting Group who studies manufacturing. "People think about manufacturing as back-breaking work, but it's not that anymore. It has radically changed from a demographic perspective."
"Nope, those factory jobs ain't coming back" – Pethokoukis, AEI
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Tweet of the day: "@groditi For better or worse (worse) the world revolves around the US real [bond yield] curve. It might not always, but it does right now. Act accordingly." – Twitter
Diversion: There's plenty of bad things going on in the world but this story provides a helpful reminder that there are brilliant people doing amazing things to make life better,
"Scientists build world's tiniest engine: 'Ant' motor first capable of driving nanobots " – Financial Times
Scott Barlow