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Credit Suisse U.S. equity strategist Jonathan Golub is providing investors with helpful perspective for following markets in the coming months with “Blowout Jobs Report,” a note released Monday. He believes equity prices will be the focus of a tug of war between two competing narratives.

On the one hand, economic data is likely to provide positive surprises as activity recovers from its pandemic-related anemic levels. Employment numbers released Friday are a good example as job creation in both Canada and the United States blasted past consensus forecasts.

Mr. Golub writes, however, that while improving data will “warm investors’ hearts … Over the intermediate term, by contrast, focus will shift to how long it will take to regain pre-crisis business and employment levels.”

There are globally prominent strategists, like Michael Wilson at Morgan Stanley and Credit Suisse’s Andrew Garthwaite, who believe that a rapid, sustainable economic recovery is already underway. There are others, like Citi economist Dana Peterson, forecasting a long, slow, economic slog of a recovery that equity investors are not prepared for.

Ms. Peterson published a research report Tuesday estimating when business activities in major global sectors will return to the fourth quarter of 2019 levels. She expects global manufacturing to return to normal in five quarters but regaining previous revenue peaks in other sectors will take much longer: more than two years for hotels and restaurants and also retail and wholesale trade.

James Rossiter, head of global macro strategy for TD Securities, expressed a view similar to Citi’s in a June 5 report. “The crisis will unfold in multiple stages," Mr. Rossiter wrote. "Longer-lasting [economic] scarring is likely to persist as recessionary dynamics emerge in the second half of the year across many key G10 economies.”

Even the bulls, like Mr. Garthwaite, admit that stock prices are likely ahead of themselves at this point – he predicts a period of flat to lower markets while asset prices reassess the pace of mid-term profit growth.

The drivers of the market rally are really strong, as I outlined in Monday’s newsletter. Essentially, ultra-low interest rates are incentivizing a giant wall of liquidity into equities that now includes bored sports fans becoming day traders.

I hold all of my market-related opinions lightly, but, at this point, I do expect that the fourth quarter of 2020 will prove treacherous for investors. With a better feel for 2021 profit estimates, the market will be forced to re-examine stock prices in light of a post-virus comeback that for many services-related sectors will be slower than currently believed.

If volatility does occur in the second half of the year, I will be ready with a list of stocks with the potential for stable long-term earnings growth.

-- Scott Barlow, Globe and Mail market strategist

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The Rundown

Good news for bulls: Stock market recovery spreads to unloved sectors

This is starting to look like a real bull market. No longer powered by just a smattering of internet giants, the stock market surge has broadened out to include stocks and sectors most investors wouldn’t have touched just a few weeks ago. What were the dregs of the market after the pandemic took hold – airlines, cruise lines, banks, the energy sector, small-cap stocks and foreign equities – have suddenly become the hottest stocks out there. Tim Shufelt reports (for subscribers)

For once, mutual funds aren’t trounced in a comparison with ETFs

There is hardly a worse product in the investing universe than a mutual fund sold with no advice or financial planning. Fees grind down your returns in these funds, with no offsetting benefit of advice that guides you toward financial success. Index-tracking exchange-traded funds are a better choice because their tiny fees are likely to result in superior returns. But what about mutual funds sold by advisers who provide advice and planning? Put into proper perspective, investment returns from advisers such as this are more competitive than you might think. Rob Carrick shows us the proof. (for subscribers)

Six dividend-growth stars that have aced the past 12 months

There are plenty of examples of dividend growth stalwarts surviving the stock market turmoil to date in good shape. Rob Carrick gives us six examples listed on the TSX. (for subscribers)

Investors brace for market swings as Trump slips in election polls

The U.S. presidential election is re-emerging as a potential risk to markets after a shift in polls that has seen President Donald Trump lose ground to Democrat Joe Biden. Concerns over election-fueled volatility have regained prominence in recent weeks, even as broader market swings have subsided and stocks have surged. Futures on the Cboe Volatility Index, known as Wall Street’s “fear gauge,” show a visible bump in volatility expectations near the election. April Joyner of Reuters reports. (for everyone)

A casino or stock market? Retail buying frenzy goes wild

A raft of small-cap stocks has soared by hundreds of millions of dollars in value in recent weeks as frenzied retail traders piled in to a blistering stocks rally. Increased savings, stimulus checks from the government, and ultra-low interest rates due to the coronavirus pandemic have led to a flood of money into the markets from punters, leading to chaotic trades via mobile phone apps. A little-known Chinese online real estate company’s American depositary shares (ADSs) jumped as much as 1,250% on Tuesday before closing 400% higher. The reason cited widely on social media was a part of its name, FANGDD Network. Thyagaraju Adinarayan and John McCrank of Reuters report (for everyone)

Others (for subscribers)

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Tuesday’s Insider Report: This bank stock is being scooped up

Chinese companies put U.S. listing plans on ice as tensions mount

Once bitten, not shy: Investors again seek margin loans as stocks rally

Number Cruncher: Nine Canadian dividend growth stocks you won’t find in the S&P/TSX

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What’s up in the days ahead

Crude oil prices have staged quite a recovery in recent weeks. But should investors start nibbling at energy equities? David Berman will share some thoughts.

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

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