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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Credit Suisse U.S. equity strategist Jonathan Golub believes inflation pressure will be “transitory for longer,”

“There are times — like the present — when the data obfuscates rather than illuminates … While the latest [U.S.] CPI report says that inflation is up 5% year-over-year, the more recent trend (3 months annualized) is closer to 8% ... [Policy makers’] models — built upon historically normal relationships — break down in periods such as this… We believe that inflation, while transitory, cannot dissipate until supply chain and other post-pandemic disruptions resolve themselves. We find it hard to believe this will occur before Labor Day, or even Christmas. Put differently, we see transitory as much more protracted … From an investment perspective, as long as disruptions pock the economic landscape, and inflation runs hot, Value and Cyclicals should continue to outperform … The world will eventually return to normal, but on its own timeline. While everyone is focused on Fed decision making and policy initiatives from Washington, over the near term, none of this will speed up the delivery of your next online package or the ability of your local restaurant to find kitchen help.”

“@SBarlow_ROB CS’s Golub: inflation pressure will be ‘transitory for longer’” – (research excerpt) Twitter


Morgan Stanley commodity strategist Martijn Rats recommends investors favour energy over industrial metals,

“As the world emerges from lockdown, ‘buying stuff’ makes way for ‘doing things’. That favours Energy over Metals – a reversal of their relative performance since the start of coronavirus … Since the start of coronavirus, Metals have still outperformed Energy commodities significantly … Energy demand suffered considerably in 2020, driven by a decline in mobility. Meanwhile, a surge in spending on durable goods meant Metals demand was generally more resilient … Although inflation will remain a key LT theme for Commodities, our economists expect this factor to take a breather for now, particularly after recent hawkish FOMC comments. 4. Positioning more extended in Metals: Speculative positioning in Metals is still at the upper end of the historical range which is not the case for Energy.”

“@SBarlow_ROB MS recommends energy over metals” – (research excerpt) Twitter


Citi global strategist Mert Genc advises clients to “enjoy the ride for now” but be wary of more difficult markets in 2022,

“The bottom-up consensus currently predicts MSCI AC World EPS growth of 39% for 2021, up from 26% at the start of the year. The absolute forecast for 2021 EPS has been upgraded by 15%. The UK has been revised up the most (+20%), followed by the US, EM and Japan at around 15%. Cyclical sectors have led the way, as they usually do. 2022: Analyst Forecasts Still Too Low — Citi economists’ 2021 global GDP growth forecast of 6.0% suggests 40% global EPS growth, similar to current bottom-up forecasts. But for 2022, our 4.2% global GDP growth forecast would imply EPS growth nearer 20%, above the +10% bottom-up consensus. This suggests scope for more analyst upgrades. Market: Upgrade Support to Fade in 2022 — Global equities usually do well in year one of an EPS recovery, when growth is strong and net earnings revisions positive. Year two of the cycle (2022) tends to be tougher as growth fades and revisions turn negative. Enjoy the ride for now.”

“@SBarlow_ROB Citi: investors should “enjoy the ride for now”” – (research excerpt) Twitter


Diversion: “Martian oxygen” – M.I.T. Technology Review

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