Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Exchange-traded funds are linked to indexes.
So when BMO chief strategist Brian Belski predicts they will underperform, he doesn't mean the benchmark. He's indicating that actively managed funds will exceed index returns,
"We believe an important trend has quietly flown under the radar – intra-stock correlations have dropped in recent months and are now at significantly below-average levels after spending much of the past several years well above historical norms. Indeed, correlations had been elevated for much of the current bull market … We have found through our work that the longer the cycle, the higher the likelihood that companies begin to operate at increasingly varied fundamental levels and likewise perform at differentiated rates… we continue to believe that more active stockpicking strategies will be the key to delivering outperformance in the coming months."
There are important caveats here.
One, every study ever done concludes that over the long term, investors performance will be much better with passive investing.
Two, Mr. Belski is not arguing that every actively managed fund will beat the benchmark, investors have to find the good ones which is much easier said than done.
"Stocks Moving From Group-Think Passive to Individually Active " – Belski, BMO
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Oil prices are spiking higher this morning on reports from the International Energy Agency indicating that OPEC's adherence to production cuts is better than it ever has been before,
"Oil supplies fell by around 1.5 million barrels per day last month, including by 1 million bpd for OPEC, leading to record initial compliance of 90 percent with a six-month output-cut deal reached in December by big producers to boost prices. "Some producers, notably Saudi Arabia, (are) appearing to cut by more than required. This first cut is certainly one of the deepest in the history of OPEC output cut initiatives," the IEA, which advises industrial nations on energy policy, said."
"IEA says record OPEC cut compliance helps oil market rebalance" – Reuters
"OPEC Keeps Its Promise About Crude Oil Cuts, IEA Says" – Bloomberg
"Oil stockpiles to remain high in H1, says IEA" – FastFT
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I noted HSBC's bearish view on the loonie and the Canadian economy previously, so it's only fair to highlight Merrill Lynch's far more optimistic forecasts,
"we expect Canada's GDP growth to accelerate from 1.3 per cent in 2016 to 2.3 per cent in 2017 driven by faster U.S. growth, higher oil prices and stimulative domestic fiscal and monetary policies. .. In our baseline [forecast] there is little protectionism against Canada so there should be no rate cut"
"@SBarlow_ROB: ML is A LOT more bullish on Canadian economy than Macquarie" – (research excerpt) Twitter
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Tweet of the Day: "@Sunchartist VIX lowest weekly close on record 10.02. Max number of consecutive weekly closes below 11.00 is 3" – Twitter
Diversion: An excerpt from Michael Lewis's new book on behavioural psychology, "Bias in the ER: Doctors suffer from the same cognitive distortions as the rest of us." – Nautilus
Scott Barlow