Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The Bank of Canada’s Financial Stability Report released Thursday provided an alarming statistic about household mortgage debt,
“Affected households will struggle to manage income losses. The adjustment will be especially difficult for those that are highly indebted and must dedicate a large share of their incomes each month to regular payments. In addition, many households have limited liquid assets. About 20 percent of all mortgage borrowers do not have enough liquid assets to cover two months of mortgage payments”
For many Canadians, the quarantine represents a financial race against time.
“Financial System Review—2020″ - Bank of Canada
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Bank of America U.S. quantitative strategist Savita Subramanian is convinced that high-quality stocks – those with the strongest balance sheets and consistent, if not spectacular profit growth – are the best option for investors in 2020,
“Quality is cyclically & secularly poised to win … Our economists forecast the worst recession in the post-war era, our Regime Indicator signals that we are firmly in a downturn, the Global Wave continues to drop, and the yield curve suggests we are in for more volatility, which could be re-spawned by the upcoming presidential election. But investors are overweight Low Quality … Decelerating profit growth favors High Quality When profit growth is scarce (as it is in the current economic environment), investors tend to pay up for stable earnings growth. High Quality stocks have historically outperformed when profits have decelerated.”
The strategist reiterated her previously-published list of “16 stocks to own” as part of the theme. The list is Alphabet (both A and C classes so that counts for two), Netflix Inc., O’Reilly Automotive Inc., Tractor Supply Co., Amazon.com Inc., Dollar General Corp., Helen of Troy Ltd., Signature Bank, IDEXX Laboratories Inc., Scott’s Miracle-Gro Co., Equinix Inc., Costco Corp., Apple Inc., NVIDIA Corp. and Ameren Corp.
“@SBarlow_ROB BoA: "Decelerating profit growth favors High Quality" – (research excerpt) Twitter
“@SBarlow_ROB BoA: "16 stocks to buy and hold"’ – (table) Twitter
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Yahoo! Finance warned of a coming wave of Canadian company bankruptcies,
“'There’s going to be a calm before the storm,' suggested Mohammad Rahaman, associate professor of finance at the Sobey School of Business, part of Saint Mary’s University in Halifax … Even before COVID-19, the number of corporate insolvencies was on the rise in Canada. The mining, oil & gas sector saw a 75 per cent increase in the number of filings in 2019 compared with the year before, according to the Canadian Association of Insolvency and Restructuring Professionals. Among the other sectors seeing double-digit increases were wholesale trade and manufacturing. More recently, the cannabis sector took a significant hit, with six companies filing for creditor protection in the first quarter of this year … Other unstable industries under threat, say industry observers, include the battered retail sector … said.”
“Companies already in financial trouble face CCAA reckoning as COVID-19 drags on” – Yahoo!
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Column: “ ow rates to drive new equity market bubble to rival the late 1990s: top strategist” – Barlow, Inside the Market
Diversion: “The Coming Mental-Health Crisis” – The Atlantic
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Scott Barlow