Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Canadian investment analyst Alexander MacDonald cites a fascinating discovery from a recent RBC research report,
"@alex_macdonald Great tidbit from RBC: Canadian banks are the only North American sector with a better return over the last 25 years than Berkshire Hathaway." – Twitter
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Bank of Montreal Chief Strategist Brian Belski released his sector recommendations for the remainder of 2017 in both Canadian and U.S. markets. Mr. Belski believes that the S&P 500 will outperform the S&P/TSX Composite. His favoured sectors in Canada are financials, industrials and materials. In the U.S., he likes financials, industrials, health care and materials.
"@SBarlow_ROB BMO: Top Canadian equity sectors ' – (includes table) Twitter
See also: "@SBarlow_ROB Citi's Levkovich reluctant to raise SPX targets." – (research excerpt) Twitter
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Fed chair Janet Yellen speaks today after a series of FOMC members, including Lael Brainard who has been among the most dovish members, hinted of a rate hike after the meeting on March 15. The Financial Times argues, however, that bond markets, by not reflecting rising inflation expectations in longer term bonds, are not playing along and are sending a warning to equity investors at the same time,
"There are few signs that fixed income investors think the new administration will be able to jump-start the economy, leading to a durable growth spurt and ultimately much higher interest rates. 'The bond market is taking a totally different view from the equity market. Blowing raspberries is a good way to put it,' says Jim McCaughan, chief executive of Principal Global Investors. 'There's no belief that the growth agenda will be dramatic.'"
"Bond investors send warning for record high equity market" – Financial Times
"Yellen's Shrinking Room for Maneuver" – El-Erian, Bloomberg
"Treasury Bulls Gather at Long End as Markets Discount March Hike" – Bloomberg
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Two studies by Harvard academics are of note this morning. First, Bloomberg highlights a new study from the school concluding that the bursting of equity bubbles are predictable,
"While the Harvard authors found that much of Fama's view is correct, especially that sharp run-ups in shares aren't by themselves progenitors of market meltdowns, they say tools exist for bailing from the rallies most likely to end violently. Keeping out of crashes can add 10 percentage points to an investor's long-term return, they said. 'When investors look at a very large price runup in an industry and they are concerned if there is a potential bubble, they should look at some of the other non-price features and behavior as a guide to what might happen,' Greenwood said by phone . 'People who have studied bubbles have been solely focused on the price action. We wanted to have a serious attempt to bring in some other information.'"
The study includes high share issuance and rising volatility among the telltale signs of a market meltdown.
The other Harvard paper calculates the world's most overpaid CEOs,
"We've been saying the most overpaid CEOs under-deliver for shareholders. In examining this data from the following two years of our report, we have found dramatic results—not only does the group of 100 most overpaid CEO companies of the S&P 500 underperform the S&P 500 by 2.9 percentage points, but the firms with the 10 most overpaid CEOs underperformed the S&P 500 index by an amazing 10.5 percentage points and actually had a negative return, reducing the actual value of the companies' shares by 5.7 percent. In summary, the firms with the most overpaid CEO's devastated shareholder value."
The study ranked CBS' Leslie Moonves, Salesforce.com's Marc Benioff, Discovery Communications' David Zaslav , General Growth Properties' Sandeep Mathrani and Regeneron Pharmaceuticals head Leonard Schleifer as the five most overpaid CEOs.
"Harvard Academics Reveal Blueprint for Avoiding Stock Crashes" – Bloomberg
"The 100 Most Overpaid CEOs" – Harvard Law School Forum
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Tweet of the day: @Ole_S_Hansen Some of the #commodities exposed to corrections due to elevated fund positioning #oil #silver #copper #sugar " – (includes six charts) Twitter
Diversion: "20 soda brands you'll never taste again" – Business Insider
Scott Barlow