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Morgan Stanley U.S. equity strategist Michael Wilson, among the first Wall Street pundits to correctly assess the sustainability of the post-March equity rally, is now warning clients against the current work-from-home-related market winners in favour of neglected materials and industrial stocks.

In his Weekly Warmup report, Mr. Wilson noted that investments in companies able to operate relatively close to normal during the pandemic – notably large-cap technology – have been the big winners so far in 2020.

At this point, however, the strategist sees that “expectations are high and comparisons difficult” for these companies and disappointments in terms of revenue and profit growth are becoming more likely in 2021. Stocks like Zoom Video Communications Inc., for instance, will continue to benefit from lockdown conditions, but it’s highly unlikely they will ever see a year-over-year growth surge like 2020.

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Morgan Stanley believes that companies that operate in sectors where demand has been hit hardest by COVID-19 are set to outperform. Growth expectations for these firms remains low, easier to beat, and in many cases, pent-up demand will help quickly push profitability back to pre-pandemic levels.

The potential for U.S. fiscal spending on infrastructure after the presidential election has Mr. Wilson very optimistic about industrial and materials stocks. He is particularly positive on the outlook for copper miners.

In the short term, the strategist believes U.S. equity markets will trade in a narrow range, and that investors should take advantage of any weakness to allocate assets to companies that will be the biggest beneficiaries of a full reopening of the North American economies.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Element Fleet Management Corp. (EFN-T) Last week, its share price advanced 14 per cent on high volume ahead of the company’s earnings announcement this Tuesday. This positive price momentum may continue, as a potential near-term catalyst is news surrounding the company’s plans on returning capital to its shareholders, including a potential significant dividend increase. Jennifer Dowty has a full profile of the stock. (for subscribers)

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The Rundown

The surprising case for why bonds are a bargain despite dismal yields

Back off, bond haters. Not only do bonds deserve to be in your portfolio despite their near zero yields, they deserve an even bigger place than normal. That is the surprising contention of Roberto Perli, head of global policy at Cornerstone Macro, an investment research firm in New York. To say that not everyone agrees with this positive outlook for bonds is an understatement. Ian McGugan looks at the latest arguments from leading money managers on whether bonds still deserve a place in your portfolio. (for subscribers)

To hedge, or not to hedge? It’s complicated

A reader asks our John Heinzl whether it’s better to buy a hedged or unhedged exchange-traded fund that follows the S&P 500. Here’s his response. (for subscribers)

Investors' bold bets on Biden win pose market risk

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With just over a week to go before the U.S. presidential election, investors may be placing too much confidence in a decisive win by Democratic challenger Joe Biden as his lead in opinion polls narrows. Market participants have in recent weeks pulled back from bets that would benefit from election-related volatility while piling into assets that would benefit from a Biden win, including alternative energy shares and cannabis stocks. As Mr. Biden’s lead has narrowed in recent days, some market watchers worry that an unexpected victory by U.S. President Donald Trump or an uncertain election outcome could force the type of violent positioning unwinds that occurred in 2016, when investors were overwhelmingly positioned for a Hillary Clinton presidency. Saqib Iqbal Ahmed and April Joyner of Reuters report. (for subscribers)

COVID-19 pandemic deals body blow to quant models, study shows

The coronavirus pandemic has dealt a body blow to the quantitative model-based style of investing, with a majority of the firms using such strategies negatively impacted, a study by Refinitiv has found. Saikat Chatterjee of Reuters reports. (for subscribers)

Others (for subscribers)

The highest yielding stocks on the TSX, plus risk data

Monday’s analyst upgrades and downgrades

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What’s up in the days ahead

Should investors start flocking to the oil patch in the wake of the blockbuster Cenovus Energy-Husky Energy deal, hoping more M&A activity lies ahead? David Berman will share his thoughts.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

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