Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Jeffrey "the New Bond King" Gundlach was among the few financial insiders unwavering in their belief that Donald Trump would win the U.S. election. For investors, his market predictions are even scarier,
"'I think above 3 percent is a problem,' Gundlach told Reuters. 'If the 10-year goes above 3 percent, you would also have to say unequivocally you have seen the end of the bond bull market.' On an investor webcast late Tuesday, Gundlach reiterated that U.S. President-elect Donald Trump's administration will be 'bond unfriendly' and investors should brace for a 6 percent 10-year Treasury yield within four to five years … Gundlach, known on Wall Street as the "Bond King," went "maximum negative" on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent."
The end of the bond bull market has enormous implications for investors, as it also likely means a bear market in dividend and income equity sectors.
"Gundlach: U.S. 10-year Treasury yield above 3 percent will harm stocks, housing' – Reuters
"Gundlach Says 10-Year Treasuries Topping 3% Would Punish Markets" – Across the Curve
Counterpoint: "Expect Higher Rates. Be Wrong. Repeat." – Gadfly
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Federal Reserve chairwoman Janet Yellen will announce the central bank's decision on interest rates at 2:00 p.m. ET today with a 25-basis-point increase in benchmark rates almost assured. As always, Bloomberg's Matthew Boesler wrote the preview to read,
"While a quarter-point rate hike on Wednesday to a range of 0.5 percent to 0.75 percent is practically a foregone conclusion, investors will be keen to see how policy makers change their 2017 forecasts and what Fed Chair Janet Yellen has to tell journalists … Here's what to watch for: The so-called 'dot plot' graphic, which contains rate forecasts of each of the 17 officials on the policy-setting Federal Open Market Committee, will give an early glimpse of their thinking about next steps.'
"Yellen Outlook Blurred by Trump Fiscal Plans: Decision-Day Guide"- Bloomberg
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With the OPEC deal established, investors can expect the oil price to be determined by demand rather than supply in the coming months. The Wall Street Journal reports that demand is expected to be a bit weaker than normal for 2017,
"After years of healthy growth fueled by low prices and Asia's expanding appetite, demand for oil next year could increase at its slowest pace since 2014, some analysts say… Emerging giants such as China aren't increasing their demand for oil at the speed they once were. Analysts also expect higher U.S. interest rates to hit emerging market demand."
"Having Addressed Supply, Oil Markets Face New Threat: Demand" – Wall Street Journal
"Opec: oil market won't balance until second half of 2017" – Financial Times
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I mentioned in Tuesday's Globe Investor newsletter that I thought value investment styles are likely to outperform in 2017. Morgan Stanley supported this notion in a recent report,
"November was yet another good month for value globally, confirming the rotation towards value that emerged earlier this year. Value outperformance was stronger on a market relative than on an industry relative basis in North America and Japan.'
"@SBarlow_ROB "November was a good month for value globally" – MS' – (research excerpt) Twitter
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Tweet of the Day: "@diamondsforex War On Cash Escalates: Australia Proposes Ban on $100 Bill; No Cash Within 10 Years? mishtalk.com/2016/12/13/war… via @MishGEA ' – Twitter
Diversion: "These maps show how Americans are dying younger. It's not just the opioid epidemic." – Vox
Scott Barlow