A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
Goldman Sachs is warning of an impending equity market correction but strategists remain bullish for the year, and recommend buying any dip,
"The S&P 500 and MSCI World Index have entered their longest period without a correction of more than 5%. This has been the strongest start for global equity markets in any year for at least 30 years, and is even more extreme on a risk-adjusted basis… There remain good reasons to be bullish equities for the year… [but] a correction is becoming increasingly likely. Our GS Risk Appetite indicator is near its highest level ever, pointing to a sharp rise in optimism."
"@SBarlow_ROB GS: "a correction is becoming increasingly likely"" – (research excerpt) Twitter
"[Market] Things That Go Bump In The Night" – Hunt, Epsilon Theory
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U.S. equity market euphoria is shared by hedge funds in the oil futures market,
"Another significant sign the oil crash is behind us, is the clear shift in the futures curve. Both in New York and London, the closer the delivery, the higher the price all the way through 2022. That pattern, known as backwardation, is typical of times when demand is rising and supplies are tightening, and it hadn't been so marked since 2014… "Selling begets selling and and buying begets buying," Pavel Molchanov, an energy research analyst at Raymond James in Houston, said by telephone. "There is a momentum trade at work here. Technicals look great and there is positive sentiment.""
"Hedge Funds Are Betting Big on Oil" – Bloomberg
"Oil dips but still set for strongest January in five years" – Reuters
"Why Canada is the next frontier for shale oil" – Reuters
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There seems to be no limit to the insanity of the cryptocurrency markets,
"At 2:57 a.m. on Friday morning in Tokyo, someone hacked into the digital wallet of Japanese cryptocurrency exchange Coincheck Inc. and pulled off one of the biggest heists in history. Three days later, the theft of nearly $500-million in digital tokens is still reverberating through virtual currency markets and policy circles around the world."
So, basically a massive bank heist was accomplished without the thieves leaving their keyboards.
"Massive cryptocurrency heist spurs calls for more regulation" – Report on Business
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I'm watching U.S. corporate bonds closely for signs that market sentiment is turning away from risk assets, in this case high-yield bonds.
Bond ETFs are getting hit across the board as yields rise and there are both potential bullish and bearish reactions. If investors sell bond assets and buy equities, stocks indexes could go to the moon. As Bloomberg highlights below, losses in bond markets could also cause general risk aversion and selling equities.
"Bond ETFs Awash in Pain May Be Red Flag for Risk Appetite" – Bloomberg
"@SBarlow_ROB GS: IG over HY – (research excerpt) Twitter
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Tweet of the Day: "@ReutersJamie "If the 10-year goes above 2.63 ... it will accelerate higher and equity markets are going to be spooked and maybe that's the cocktail that is coming our way." - @TruthGundlach on Jan. 10. 10y yield now 2.72%. Stocks about to be spooked? " – Twitter
Diversion: OK, this is alarming. The U.S. military is actively preparing to fight in North Korea according to one U.S. senator who visited South Korea.
"'The Military Has Seen the Writing on the Wall'" – The Atlantic
See also: " Alpha agenda, the new Cold War edition" – FT Alphaville
Scott Barlow