A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
U.K.– based Goldman Sachs strategist Ian Wright asks the important investor question "is anything safe?" and concludes that, outside of cyclical stocks, very few asset classes won't be hit by rising equity market volatility,
"When Goldilocks was in full force, little could shake the pro-growth market performance. Now, with rates and inflation - and rates and inflation volatility - picking up, Goldilocks appears to be fading, even though growth remains strong … As the macro backdrop has evolved, so has "safe haven" performance … No safe havens - and no assets or equity sectors - have had a positive beta to the VIX recently, and few have had a positive beta to 10-year yields (notably, equity cyclicals have had a positive beta to 10y yields), leading to diversification desperation."
"@SBarlow_ROB GS: No safe havens leads to 'diversification desperation'" – (Research excerpt) Twitter
"Havens Just Aren't Safe Anymore, Goldman Says" – Bloomberg
Credit Suisse assures investors that a large scale global trade war is unlikely,
"The interconnectivity of the US economy across national borders implies that a trade war would clearly be counterproductive. Illustrating this, the US has five times more FDI in China than the other way around… We think it is non-tariff barriers that are, on the whole, more damaging than tariffs. Moreover, tariffs tend to hit manufacturing, which is 80% of all trade, but manufacturing is now just 12% of US GDP compared to 25% in the 1960s."
"@SBarlow_ROB CS: no big Trade war ahead" – (research excerpt) Twitter
I can pretty much guarantee Geoff Salomons's inbox is a mountain of bile this morning after he published "It's time for environmentalists to move on from the Trans Mountain pipeline" in Maclean's,
"The problem is that both sides feel that they are right. What's worse, in this particular instance, is that they are. The immediate, short-term loss in revenue is a significant hit to Alberta and the oilsands companies that will ultimately do little to affect global oil demand in the long term. And the long-term consequences of climate change and the need for aggressive, immediate action is needed."
"It's time for environmentalists to move on from the Trans Mountain pipeline" – Maclean's
During the financial crisis, we re-learned the lesson that market problems tend to appear in credit markets before equities. Bloomberg today noted stress appearing in global money markets,
"The London interbank offered rate, or Libor, and rates on Treasury bills are around levels not seen since 2008. The Federal Reserve's move to tighten policy forms the backdrop for the increase, but an added force behind the surge this year has come from a deluge of supply as U.S. deficits widen…. "We are in a new paradigm," said Jerome Schneider, head of the short-term and funding desk at Pacific Investment Management Co. "The clear focus for the market is where will incremental demand come from to meet this supply.""
Domestically, I'm not expecting big financial stress in commercial or mortgage-backed paper, or money markets even in the event of a disorderly drop in housing prices. My view would change quickly if this stress appeared.
"Sea Change Is Underway in Money Markets for Banks, Investors" – Bloomberg
"Authers' Note: Precarious credit markets" – Financial Times
Tweet of the Day: "@washingtonpost BREAKING: Trump ousts Secretary of State Rex Tillerson, will replace him with CIA Director Mike Pompeo wapo.st/2Ip8NXw " – Twitter
Diversion: "How Psychopaths See the World" – The Atlantic