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Top Links: This one chart makes it hard to be bullish on equities

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

There's no text to go along with the first link today – it's just a chart – but it's one that successfully summarizes why I'm finding it difficult to be bullish on global equity markets. Published by Credit Suisse, the chart shows that global equities remain elevated despite a sharp decline in the global economic surprise index (which measures important economic data relative to expectations).

I've written previously how Merrill Lynch quantitative strategist Savita Subramanian, arguably the most respected analyst regarding earnings expectations, believes that 2017 U.S. profit expectations are currently double the amount she believes will actually occur. In addition, the World Trade Organization released an estimate this morning predicting that full year global trade activity for 2016 will grow at 1.7 per cent, much slower than their April estimate of 2.8 per cent.

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It's not difficult to argue that the fundamentals underpinning global equity values are deteriorating quickly.

"@NickatFP Surprise pic.twitter.com/lHf0YPXxxw " (chart) – Twitter
"Prepare for bumpy markets as analysts slash profit forecasts" – Barlow, Inside the Market (Sept. 19, 2016)
"WTO Says Global Trade in Its Worst Year Since Financial Crisis" – Bloomberg

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The price of oil is falling hard this morning,

"Iran wants to raise its crude production to 4 million barrels a day, Bijan Namdar Zanganeh told Bloomberg Television in an interview Tuesday. OPEC's third-largest producer -- with daily output of 3.6 million barrels last month -- will talk to other members at the International Energy Forum in the Algerian capital and it's possible the group could reach a formal supply deal at its November meeting in Vienna, he said. 'It's not our agenda to reach agreement in these two days,' Zanganeh said. 'We are here for the IEF and to have a consultative informal meeting in OPEC to exchange views. Not more.'"

"Iran Doesn't Want Oil Deal in Algiers, Won't Freeze Output" – Bloomberg
"Goldman cuts Q4 WTI oil forecast to $43 a barrel from $50" – Marketwatch
"@AntBarton89 Goldman Downgrade Their Oil Price Forecast Through Q416 #OOTT pic.twitter.com/f0oPZ2ULWS " (research excerpt) Twitter

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A Bloomberg report uses the Canadian economy as an example of how an aging population can limit national growth,

"Bank of Canada Governor Stephen Poloz gave a blunt speech last week, saying that five decades of expansion powered by the Baby Boom generation is ending, and Canada's potential economic growth has slowed to 1.5 percent… The biggest gain in the population over the past 12 months has been the 55 years and older set, which rose almost six times more than the so-called prime age population aged 25 to 54… 'The most important force pushing the neutral rate down has been a steady decline in the potential growth rate of the economy,' Poloz said. 'In turn, this decline is being driven primarily by the aging of our population, which is slowing the rate of growth of the labor force.''"

"Getting Older is Cruelest Blow to Global Growth. Just Ask Canada – Bloomberg

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Tweet of the Day: "@Reuters Factbox: Market participants react to U.S. presidential debate reut.rs/2dcmj2r pic.twitter.com/XgXd4kkn2c " – Twitter

Diversion: "The best 100 films of the 21st century, according to 177 film critics around the world" – Quartz

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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