A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Merrill Lynch chief quantitative strategist Savita Subramanian outlined the seven investing strategies most likely to beat the benchmark. The list makes it easier to see how rare it is to beat the equity index – many of the methods are deeply counterintuitive and practically challenging. Here’s tip No. 3,
“Take the road less traveled by the sell-side: More eyeballs means less alpha. By limiting one’s universe to stocks with below average sell-side coverage, fundamental strategies can improve returns by as much as 10ppt per annum”
“ @SBarlow_ROB ML: 7 Ways to beat the benchmark” – (research excerpt, full list) Twitter
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The WTI crude price is down by almost 8 per cent from its May 21 high on concerns OPEC and Russia are set to increase output. One analyst writing in the Financial Times makes the provocative prediction that US$50 crude is now more likely than $100,
“A Martian watching the oil market from outer space during the past few months will have noticed one thing above all else. There is no shortage of supply and no imbalance of supply and demand. Any shortfalls in production from places such as Venezuela have been easily covered by production from elsewhere, not least the US where output continues to grow month by month thanks to the continuing shale revolution… Speculation got ahead of the reality. At the same time reality moved in the opposite direction.”
“The surge is over — why $50 oil is now more likely than $100” – Financial Times
Counterpoint: “Oil prices could soon ‘spike’ toward $100 a barrel regardless of OPEC and Russia, strategist says” – CNBC
“Oil remains under pressure” – Bloomberg
“Oil sinks further as OPEC and Russia look to raise output” – Reuters
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Goldman Sachs believes the loonie will rally 9.0 per cent against the U.S. dollar,
“We see several reasons to expect CAD outperformance over the coming months, including: (i) fading growth headwinds, (ii) limited spare capacity and on-target inflation, (iii) a sharp improvement in Canada’s terms of trade, and (iv) the fact that the currency is undervalued on our metrics and investors are generally positioned short. We recently initiated a new short USD/ZAR Top Trade and now, as a G10 counterpart, we recommend short USD/CAD with a total return target of 9%”
“@SBarlow_ROB GS: Short USDCAD” – (research excerpt) Twitter
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The headline is typically alarmist, but Business Insider does detail some legitimate concerns about global corporate debt markets,
“U.S. corporate debt has risen from $40 trillion to $70 trillion since the top of the last bubble in 2007. That’s 63% in 10 years. It’s risen 135% since 2000!... The problem is these long-term rates have been rising since just July 2016. They’ve gone from 1.38% to 3.10%. That’s an increase of 172 basis points in the risk-free 10-year Treasury bond. That naturally reverberates up through the risk spectrum from investment grade corporate bonds to junk bonds.”
“@SBarlow_ROB Some BI alarmism on corp debt “The corporate bond bubble is starting to burst” businessinsider.com/the-corporate-… “ – (excerpt) Business Insider
“Goldman says riskiest junk bonds are most ‘mispriced’ since 2007 “ – Bloomberg
Tweet of the Day:
Diversion: “‘There’s a Perception That Canada Is Being Invaded’” – The Atlantic
Scott Barlow