Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
BMO Nesbitt Burns Chief Investment Strategist Brian Belski has stuck his neck out and called a market bottom, at least for U.S. markets. In a presentation e-mailed to clients Monday, MR. Belski cites five reasons for believing a rally in the S&P 500 is imminent; seasonality, stability in U.S. earnings, stocks can easily rally in an environment of rising interest rates, also weak commodity prices, and lastly, portfolio allocations to bonds remain at peak levels and are set to move to equities.
Goldman Sachs has taken an even more aggressive approach, not only predicting an 11-per-cent rally in U.S. markets but also suggesting stocks that will outperform. Bloomberg reports:
" 'Simply put, firms with high U.S. sales will experience limited impact on their top and bottom line from economic weakness in China. In Exhibit 17 we highlight a list of 25 stocks that have declined in price roughly twice as much as the S&P 500 since the index hit a high in May and also generate nearly all their sales domestically.'
Big names include Whole Foods Market, Macy's, Chesapeake Energy, Anthem, and Norfolk Southern."
"Goldman: Here Are 25 Beaten-Down Stocks That Are Insulated From the Turmoil in China" – Bloomberg
"Why Goldman thinks the S&P 500 is headed for an 11% rebound" – Marketwatch
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The Shanghai Composite fell hard again Tuesday but the reaction in global markets was much, much different than Monday – they didn't care. The FTSE 100 wasn't paying any attention to the selling in Asia and, when Chinese authorities announced an interest rate cut after their market close, the FTSE proceeded to rally almost three per cent. At time of writing, S&P 500 futures indicated a 3.4-per-cent jump at market open.
"China Cuts Interest Rates for Fifth Time in Bid to Stem Rout" – Bloomberg
"Is China blinking?" – Marginal Revolution
"China Said to Halt Stock Support Amid Intervention Debate" – Bloomberg
"China says will crack down on underground banks, stem capital flight" – Reuters
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If Canadian dividend investors aren't worried about the U.S. Federal Reserve, they should be. FOMC voting member Dennis Lockhart reiterated Monday his belief that a U.S. interest rate hike will happen in 2015, and this caused a brief hiccup in an already volatile market session.
The good news is that expectations for the timing of a Fed hike have been pushed out from September to December. Canadians should still remember that a jump in U.S yields is likely to push domestic bond yields higher. This event would cause weakness in Canadian dividend sectors. (As a related fact: if domestic yields don't move higher with Treasuries, this would likely set off another leg lower for the loonie).
"A lot of analysts are saying the Fed will chicken out in September" – Business Insider
"6 reasons the FOMC is unlikely to move in September" – Sober Look
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Tweet of the Day: Terrific analysis of Monday's sell-off from UBS, posted as excerpt. "@RobinWigg UBS's global CIO Mark Haefale on the latest "Black Monday" to hit markets. pic.twitter.com/L4gUZisFCV – Twitter
Diversion: You don't have to be an auto racing fan to be fascinated by this Wired report detailing the surprising success of Mclaren – a Formula 1 racing team – in industrial consultancy. Story features the development of a $20,000 bicycle.
"How McLaren F1 Tech Is Supercharging the World's Industries" – Wired
Scott Barlow