Skip to main content
investor newsletter

Equity markets have remained surprisingly strong despite data showing a significant deceleration in global economic growth. Citi global strategist Robert Buckland discussed the importance of weaker economic data for equity investors in PMIs rolling over: Equity implications published Wednesday. In short, Mr. Buckland advises investors to prepare for a stock market correction, and then buy the dip.

PMIs refers to purchasing manager indexes, monthly surveys of major global manufacturing companies regarding month over month changes in business activity, staffing and new orders. The survey is structured so that a reading above 50 indicates growth relative to the previous month.

The slowdown has been particularly acute in the U.S. where the manufacturing PMI has dropped from March’s 64.7 to 59.50. In China, the world’s second largest economy, PMI peaked in November at 52.1 and is now barely positive at 50.4.

Mr. Buckland is surprised at the S&P 500′s continued strength since the PMI peak, noting that historical patterns imply an equity correction of between 10 and 15 per cent.

Importantly, while the PMI suggest a higher likelihood of a pullback, buying the dip has previously been a lucrative strategy for investors at this stage of the market cycle. “If economies continue to recover (PMIs stay above 50) then the bull market soon resumes,” Mr. Buckland writes, “Investors should buy into any dip associated with the initial PMI roll-over.”

He goes on to note, however, that adding equities becomes dangerous should a slowdown materialize that sees major PMIs fall below 50.

-- 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

Pfizer Inc. (PFE-N) The stock of the drug maker had been languishing for years, and even after its vaccine was given conditional approval in the United States, the price barely moved. But it recently broke through the US$40 barrier and is now trading around the US$50 level. Is the stock, which pays a decent dividend, still worth holding? Gordon Pape shares his thoughts.

The Rundown

Is now a good time to buy REITs?

The Canadian stock market is up about 70 per cent since the worst of the 2020 crash, which presents a problem for investors looking to branch into something new. Take real estate investment trusts. “I’d like to buy some REITs or add REIT ETFs to my portfolio,” a reader told Rob Carrick the other day in an e-mail. “What are your thoughts on buying REITs at this time?” Here’s his response.

Short sales on the TSX: what bearish investors are betting against

According to academic studies, stocks targeted by short sellers tend to underperform, but may see their prices periodically shoot upward in short squeezes. Monitoring short-selling activity can thus help with identifying torpedo and rocket stocks. To this end, the Globe and Mail presents this latest instalment of the Short sales on the TSX column, covering the month to mid-August.

Investors can still find value in out-of-favour special situation stocks. Here’s four of them

In the extended bull market of 2021, value investors may still have an opportunity to find upside by investing in what are known as special situations. Special situations are unique corporate events such as mergers, recapitalizations and spinoffs. They can have an impact on a company’s stock price and create gains, regardless of fundamentals or market direction. A current devotee of special situations is Harris Kupperman, founder and president of Praetorian Capital Management. His fund soared 127.5 per cent in 2020, bringing its average annual return to 9.1 per cent since inception in 2003. Larry MacDonald tells us about four of his current stock picks.

Looking for a culprit in recent bond yield declines

The first quarter of 2021 was devastating for government bonds in North America. The U.S. 10-year Treasury yield, for example, rose from less than 1 per cent at the end of December to 1.75 per cent by April (bond yields and prices move inversely). Then yields sharply declined to less than 1.2 per cent by July. Pundits have been trying to explain why yields have dropped despite the not-so-good news on the inflation front – and what the bond market is signalling for the economy and the stock market. Value investing professor Dr. George Athanassakos shares his thoughts on what’s behind the moves in credit markets.

After summer of stock market highs, signs of unease emerge

Stock markets are heading into September near record highs but the fast-spreading Delta coronavirus variant is making some investors reassess how so-called reflation trades could perform in coming months. A raft of indicators from consumer surveys to derivatives suggest that without fresh catalysts markets could be in for a pause or even a reversal over the autumn months. Speculators have also been piling into the dollar, with positioning at its highest in a year. Saikat Chatterjee of Reuters reports.

Also see:

TSX seen extending its record-setting rally in 2022: poll

Wall Street’s pandemic rally to sputter, strategists warn in new poll

Funds trim hawkish Fed bets as Jackson Hole looms

Others

Number Cruncher: Nine Canadian-listed beverage stocks that could present an investment opportunity

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

U.S. corporate earnings season expected to lift S&P 500 by another 8% through end of year: Wells Fargo

Globe Advisor

How advisors can determine the level of ‘greenwashing’ in investments

Crypto exchanges are booming – for now

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

What’s up in the days ahead

Rob Carrick will take a closer look at how the elimination of trading commissions by National Bank’s online brokerage affects investors.

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.

Compiled by Globe Investor Staff