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Top Links: Merrill Lynch says buy growth stocks, dividends to underperform

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

The jobs numbers are crossing the wire while I'm typing. Statscan reported 67,200 new jobs, when economists predicted a mere 7500. South of the border, 156,000 new jobs were created versus average expectations of 172,000.

A flash crash in the British pound was the big news overnight as the currency dropped almost 10 per cent in seconds against the U.S. dollar.

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No one's sure what really happened at this point. At first, "fat fingers" were blamed – this describes a mistake like a trader unwittingly selling 100,000 futures contracts when they meant to sell $100,000 worth – but JP Morgan analysts noted that the sell-off happened on big volume which means fat fingers are unlikely.

The pound recovered somewhat from the beating but is now heading steadily south again.

"Currency markets price in 'hard' Brexit. Will stocks follow suit?" – Report on Business
"What We Know About the Pound's Friday Flash Crash: Q&A" – Bloomberg
"'Flash crash' decimates sterling" – Reuters

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Merrill Lynch's chief investment strategist Michael Hartnett is predicting a massive sea change in market performance. In essence, Mr. Hartnett believes all the successful investment themes of the past few years – including dividend investing – will now underperform, replaced by sectors that do best in a growth, inflationary environment,

"'Peak liquidity': the era of excess liquidity is ending. 'Peak globalization': the era of free trade, capital & labor mobility is ending. 'Peak inequality': as electorates demanding 'War on Inequality' via fiscal stimulus. We are long stocks & commodities, short bonds; we expect slim returns from bonds & stocks in coming quarters; but double-digit upside likely for "[zero interest rate policy] losers" in 2017."

"@SBarlow_ROB: Bold proclamations from ML's Hartnett pic.twitter.com/vjLTIhvTMr " (research excerpt) Twitter

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Canadians' first reaction to federal measures to curb the housing market is, reasonably, "what happens to the price of my house?"

There is a larger economic problem though – the housing market has been responsible for a large part of the economy in Toronto and Vancouver, and a slowing housing market means slower overall economic growth,

"Economists are already redoing their forecasts in the wake of policy moves aimed at taming the Vancouver and Toronto housing markets … Both B.C. and Ontario now have to come to grips with a slowdown in housing will affect their broader economies … 'While housing-related activities don't make up an outsized share of the labour market, construction and real estate services have disproportionately contributed to employment growth over the last decade,' [CIBC economists] noted."

"British Columbia, Ontario and the death of the golden (housing) goose" – Babad, Report on Business

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Bloomberg describes why investors in precious metals will be happy to see the week end,

"For all precious metals, this week was the worst in a long time. Gold sank 4.6 percent this week to $1,255.18 an ounce at 10:07 a.m. in London, on course for the biggest loss since November. Silver was hit harder, plunging 9.5 percent to $17.35 for the steepest slump since 2013. Prices were little changed in trading on Friday … 'It's definitely all about U.S. rates. Everybody is positioning around their take on the likelihood of a hike later this year,' Dan Smith, a commodities analyst at Oxford Economics Ltd. in London, said by phone."

"Losses Mount in Metals as Silver Suffers Worst Week Since 2013" – Bloomberg

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Tweet of the Day: "@RajaKorman @rortybomb @CEAChair From a market point of view, the most important thing that's happened in the last 20 years is the non-collapse of [Japanese government bonds]." – Twitter

Diversion: "What Is the Greatest Guitar Solo of All Time? There Was a Poll and the Winner Was…" – A Journal of Musical Things

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