Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Goldman Sachs chief global equity strategist Peter Oppenheimer is looking for more “fat and flat” behaviour from global markets,
“The Growth phase in the current cycle has been ‘Fat & Flat’ – with relatively low returns in a wide trading range … We have argued that the scale of the returns would be relatively ‘Fat & Flat’, with returns constrained by the ongoing tug of war between rates and growth fears, the higher than average valuations, particularly in the US, and a backdrop of weak earnings growth despite a likely soft landing. The S&P 500, for example, is at more or less the same level as in the summer of last year. Japan and Europe are a little higher, but Asia is a little lower. Overall, the global equity index is broadly unchanged … ‘Because we have high valuations, particularly in the U.S. equity market, and we’ve got relatively low profit growth, and we have an alternative in pretty attractive cash rates or interest rates, we think that the index prospects remain relatively flat from here,’ [Mr. Oppenheimer] tells host Allison Nathan on the latest episode of Goldman Sachs Exchanges.”
“GS: More ‘fat and flat’ for global markets” – (chart) Twitter
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BofA Securities investment strategist Michael Hartnett’s weekly Flow Show report was typically blunt and intriguing,
" Zeitgeist: ‘Every billionaire minting same long T-bills, long Nasdaq barbell…biggest Q3 pain trade is lower yields, lower Nasdaq, plus higher Yen … no one has that on’ … Bonds are big, fat & trendy … Big levels breaking in 2-year yields & 5-year real rates (now highest since 2008); more interesting is yield curve steepening despite off-the-clock U.S. jobs data … into central bank meetings, driven by inflation, deficits (wars are very expensive), and strong labor market data, financial conditions tightening again in early-Q3, keeps the ‘higher-for-longer/hard landing’ view entrenched (that’s ours - we say Q3 tightening of financial conditions great [opportunity] to position for hard landing)…'”
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Also from Goldman Sachs, the firm’s Top of Mind magazine published a column entitled, “Generative AI: hype, or truly transformative?” Here are some highlights,
“GS US software analyst Kash Rangan explains that the technology’s ability to create new content in the form of text, image, video, audio, and code, and to do so via natural language rather than programming language, are its key transformative features … Sarah Guo, Founder of AI-focused venture capital firm Conviction, further explains that whereas prior iterations of AI technology required humans to write deterministic code to perform specific tasks (’Software 1.0′) or the painstaking collecting of training data to train a neural network for a specific task (’Software 2.0′), the now wide availability of foundational models (via open source or APIs), which have natural language capabilities, reasoning, and general knowledge of the world, has reduced the onus on companies to collect training data, ushering in an era of ‘Software 3.0′ … Generative AI’s transformative potential has already begun to translate into reality. Developer productivity in some cases has increased 15-20 per cent by employing generative AI tools, says Rangan… So where are the most compelling AI investing opportunities today? Rangan and Sheridan argue that the large tech companies developing the foundational AI models, as well as the “picks and shovels” businesses serving the space— semiconductor companies, cloud computing hyperscalers, and infrastructure companies — are well positioned to capture gains during the current “build” phase. Guo agrees, but also sees opportunities across the stack, and is most excited about the application layer that the broader investor base seems less sure about today”.
The report provides investment ideas. Microsoft, Alphabet and Amazon.com are listed under Global Hyperscalers. NVIDIA, Marvell Technology, Taiwan Semiconductor, Foxconn Industrial Internet, Unimicron Technology and Taiwan’s NYPCB are Global Enablers. The AI Empowered category features Meta Platforms, Salesforce, Adobe, ServiceNow, Intuit, Capgemini, Pearson, London Stock Exchange Group, Relay Therapeutics, Amgen and Exscientia.
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Diversion: “11 Undersung TV Shows to Watch This Summer” – The Atlantic
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