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Morgan Stanley chief global economist Seth Carpenter warned that “the worst of the global economic slowdown is ahead of us” on a recent edition of the firm’s Thoughts on the Market podcast entitled Tracking the Coming Slowdown. Mr. Carpenter believes there is a “brewing storm” of recession risks worldwide.

Thanks to Russia, recession risks are centered in Europe. The higher energy costs resulting from geopolitical factors is a cost shock that will limit growth. There are industries already rationing energy to save costs at the expense of production, contributing to the slowdown. Consumer purchasing power has been sharply curbed by rising energy bills.

Mr. Carpenter is also concerned about the U.K. economy where recently announced fiscal stimulus measures will only lessen the depth of a likely recession. The U.K. is subject to higher energy costs despite leaving the EU and trade relationships remain problematic.

Morgan Stanley does not believe that a recovering Chinese economy can significantly offset a global slowdown. It forecasts below-consensus GDP growth of 2.75 per cent for 2022, well below potential. Ongoing upheaval in the country’s housing market, combined with COVID lockdowns, will limit growth to 5.25 per cent in 2023, according to Mr. Carpenter. This growth is not strong enough to be a “game changer” for developed economies in his estimation.

Pointing to the continued strong jobs growth in the country, the economist expects the United States to avoid a recession. However, the Federal Reserve will not stop raising rates until growth slows dramatically. For Morgan Stanley, this means that in the short term “there is only downside” for economic and earnings growth.

Canadian investors should be cautious about adding economically sensitive exposure, including non-energy commodities and industrials, to their portfolios in the near term. Bargains in these sectors may appear if a slowdown takes hold.

The Morgan Stanley podcast is available on Apple podcasts here and Spotify here.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Park Lawn Corp. (PLC-T) Quarter-to-date, the share price of this funeral home operator is down 26 per cent, making it the worst performing stock in the S&P/TSX SmallCap consumer discretionary sector. Nevertheless, the stock has a unanimous buy recommendation from nine analysts, and the average one-year target price implies the share price may rally nearly 64 per cent over the next year. As Jennifer Dowty tells us, bargain hunters may want to put this dividend stock on their radar as the share price may be nearing a bottom.

Boyd Group Services Inc. (BYD-T) Winnipeg-based Boyd operates a network of non-franchised collision repair centres across North America. The majority of its revenue is from south of the border, which means Boyd benefits from the surging U.S. dollar. The stock is trading at a reasonable valuation and the company is seeing an improving balance sheet as well as a positive earnings outlook. Jennifer Dowty looks at the investment case.

The Rundown

Bull markets are great for takeover activity. Bear markets, not so much

When stocks are down, bargain hunters get busy. That’s why the recent market turmoil has raised hopes that the number of corporate takeovers will pick up again, rewarding shareholders with attractive bids. The problem with this optimism? Takeover activity tends to subside when markets are in turmoil. David Berman tells us more.

Want to profit from the stock trades of U.S. politicians? New ETFs are aimed to do just that

Two new exchange-traded funds are seeking regulatory approval to list on a U.S. exchange to track the stock picks of U.S. Congress members and their families. Fuelled by revelations in the media over the years, polls show that the majority of Americans believe politicians on Capitol Hill use insider information from closed-door meetings of committees and other congressional gatherings to buy and sell stocks that are to be affected by legislative changes. As a result, they are thought to be well-connected investors who outperform the stock market. But will these new ETFs really do the trick? Larry MacDonald has some thoughts.

Stock picks on the TSX: What the top analysts are recommending

More than 8,000 analysts at North American investment brokerages are ranked by and about five per cent of them have attained the survey’s top rating of five stars, based on how often they are right and their average returns. During the week ending Sept. 16, several of the five-star analysts issued or reiterated buy recommendations on Canadian stocks; just under two dozen of the picks were assigned target prices that imply a gain of more than 20 per cent in their stocks over the next 12 months. Larry MacDonald reviews the list.

Once-bitten markets are ignoring Putin’s warnings again at their own peril

Earlier this year, markets were complacent as Russia massed troops on the Ukraine border. Now, they’re once again largely shrugging off Vladimir Putin’s signal that he could be prepared to use nuclear weapons. Some say markets are underestimating risks.

Also see: ‘The next six months are going to be tough’: What the Street is saying about Putin mobilizing more troops

Top manager Vanguard bullish on U.S. Treasuries as Fed’s hikes near peak

Vanguard, the world’s second-largest asset manager, believes U.S. Treasuries are near the end of a painful decline even as prices tumble to fresh multiyear lows, a senior portfolio manager at the firm told Reuters.

Also see: Sovereign bond yields not yet reached a summit: poll

For energy investors, this time really is different - and these three stocks should do particularly well

The world is in an energy crisis. High demand is meeting low supply, and businesses and households are facing exorbitant costs or are without energy all together. At the same time, the world is looking with increasing urgency for solutions to avoid a climate disaster. Amongst the chaos is an opportunity for investors able to look through the noise, argues Chris Horwood of Orbis Investments.

Others (for subscribers)

Analysts’ forecast returns and recommendations for all stocks in the S&P/TSX Composite Index

Number Cruncher: Eight companies with reliable earnings in two recession-proof industries

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Tuesday’s Insider Report: CEO invests $1-million in this financial stock that recently rallied to a new high

Globe Advisor

Why rising interest in traditional fixed income is not affecting alternatives

How new applications in agtech are creating investment opportunities

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What’s up in the days ahead

Brenda Bouw finds out what Mike Archibald of AGF Investments is buying and selling.

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

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Compiled by Globe Investor Staff