Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Prominent Goldman Sachs economist Jan Hatzius argued that artificial intelligence will cause huge dislocations in the labour market, particularly in document-heavy sectors,
“Despite significant uncertainty around the potential of generative AI, its ability to generate content that is indistinguishable from human-created output and to break down communication barriers between humans and machines reflects a major advancement with potentially large macroeconomic effects … We find that roughly two-thirds of US occupations are exposed to some degree of automation by AI, and that of those occupations which are exposed, most have a significant — but partial — share of their workload (25-50 per cent) that can be replaced … We estimate that one-fourth of current work tasks could be automated by AI in the US, with particularly high exposures in administrative (46 per cent) and legal (44 per cent) professions and low exposures in physically-intensive professions such as construction (6 per cent) and maintenance "
“GS: “Share of Industry Employment Exposed to Automation by AI: US”” – (chart) Twitter
Morgan Stanley chief U.S. equity strategist Michael Wilson doubled down on his belief that earnings projections are unreasonably high and goes even more defensive in his stock recommendations.
Here’s the company’s summary of his most recent report,
“MS Chief US Equity Strategist Mike Wilson highlights that bond markets no longer appear to believe the Fed’s guidance. He thinks stocks are next. Just as bond markets have become dependent on Fed guidance over the past decade, he notes that the equity markets have become dependent on company earnings guidance. Given the events of the past few weeks, he thinks guidance is looking more and more unrealistic, and equity markets are at greater risk of pricing in much lower estimates ahead of any hard data changes. In Mike’s view, this is typically how bear markets end—i.e., P/E multiples fall precipitously and unexpectedly, catching many investors off guard. To Mike, the recent underperformance of small caps and low quality stocks suggests it could be imminent. This week, Mike is removing XOM (OW, $114 PT) and SPG (OW, $132 PT) from his Fresh Money Buy List and adding CL (OW, $82 PT) and WMT (OW, $160 PT). He is making these changes to position more defensively as the equity market finally prices the earnings risk.”
“MS’s Wilson ... still bearish” – (research summary) Twitter
Reuters energy specialist John Kemp detailed hedge funds skepticism on the oil price,
“Portfolio investors sold oil-related futures and options contracts at the fastest rate for almost six years as traders prepared for the onset of a recession driven by tighter credit conditions in the aftermath of the banking crisis. Hedge funds and other money managers sold the equivalent of 142 million barrels in the six most important contracts in the seven days ending on March 21, after selling 139 million barrels in the week to March 14. Total sales over the two weeks were the fastest for any fortnight since May 2017, according to records published by ICE Futures Europe and the U.S. Commodity Futures Trading Commission … Fund managers have slashed their combined position to just 289 million barrels (6th percentile for all weeks since 2013) from 570 million (46th percentile) on March 7.”
“FEARING credit crunch, hedge funds fled petroleum” – Kemp, Reuters
Diversion: “Don’t Move to These 25 Cities if You Want to Live Comfortably on $100k” – Gizmodo
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